Labor costs in the United States recorded the highest rise in history in the first quarter
US labor costs beat expectations, posting a historic quarterly high, raising concerns about persistent inflation and the potential for faster monetary policy tightening by the Federal Reserve.
The Labor Cost Index (ECI) advanced 1.4% in the first quarter, the Department of Labor reported on Friday. The data adds up to a 1% increase in the final months of 2021.
The median forecast was for a rise of 1.1%, according to a Bloomberg survey of economists. Meanwhile, the index in the annual measure rose 4.5%..
Unlike measures of earnings reported in the monthly jobs report, the ECI is not affected by changes in jobs across sectors and occupations. The wage increase was generalized in all industriesincluding strong increases in factories and service providers.
The wages and salaries of civil servants increased by 4.7% compared to the previous year, also registering a historic high. Excluding government, private wages rose by 5%.
The trend underscores how rising wages is a major part of the inflation picture and, if it continues, will continue to pressure the Fed to take a more aggressive policy approach. In March, Federal Reserve Chairman Jerome Powell said that The current rate of wage increases does not match the inflation target 2% of the central bank.
However, workers’ wages are still below the highest inflation rate in decades, putting pressure on families and threatens to slow down consumption.
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