US employment costs rose by slightly less than expected in the third quarter this year, up 0.9 percent, as benefit costs posted their smallest rise since early 2002, a government report showed on Friday.
Wall Street had forecast the Employment Cost Index, a broad gauge of what employers pay in wages and benefits, to rise 1.0 percent between July and September versus a 0.9 percent gain the previous three months.
Benefit costs climbed 1.1 percent, the smallest advance since the first quarter of 2002, after a 1.8 percent gain in the second quarter, while salaries and wages gained 0.7 percent versus a 0.6 percent rise in the previous three months.
Over the past 12 months, wages and salaries are up just 2.4 percent, the smallest 12-month change in the history of the series, which began in 1981.
Sluggish growth in pay has become a central issue in the presidential campaign with the election now just days away.
Democratic challenger Senator John Kerry says that middle-class Americans have been squeezed by limp wage growth and rising benefits costs under the presidency of George W. Bush. The White House counters that its tax cuts have boosted disposable income.
Subdued wage costs have also helped contain inflation and allowed the Federal Reserve to raise interest rates at a measured pace this year.
The Fed's policy-setting committee next meets on November 10 and is expected to lift borrowing costs by a quarter percentage point to 2.0 percent at either that gathering or in December.
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