WASHINGTON (Reuters) – U.S. labor costs rose marginally in the fourth quarter, offering some comfort to Federal Reserve officials after progress lowering inflation stalled at the end of 2024.
The employment cost index (ECI), the broadest measure of labor costs, gained 0.9% last quarter after rising 0.8% in the third quarter, the Labor Department’s Bureau of Labor Statistics said on Friday.
Economists polled by Reuters had forecast the ECI would climb 0.9%. Labor costs increased 3.8% in the 12 months through December after rising 3.9% in the year through September.
The ECI is viewed by policymakers as one of the better measures of labor market slack and a predictor of core inflation because it adjusts for composition and job-quality changes.
Government data on Thursday showed inflation picked up in the fourth quarter amid a surge in consumer spending.
The U.S. central bank on Wednesday left its benchmark overnight interest rate in the 4.25%-4.50% range, having reduced it by 100 basis points since September when it started its policy easing cycle.
The accompanying policy statement did not include the reference to inflation having “made progress” toward the Fed’s 2% target.
The Fed has forecast only two rate cuts this year, down from the four it had projected in September. That reflected uncertainty on the economic impact of President Donald Trump’s plans for tax cuts, broad tariffs on imports and an immigration crackdown, which economists view as inflationary.
Wages and salaries, which account for the bulk of labor costs, rose 0.9% last quarter after gaining 0.8% in the July-September quarter. They increased 3.8% on an annual basis, slowing from the third quarter’s 3.9% rise.
When adjusted for inflation, overall wages increased 0.9% in the 12 months through December after advancing 1.4% in the July-September quarter. The rising so-called real income is underpinning spending.
Private sector wages and salaries rose 0.9%. They increased 3.7% in the 12 months through December after rising 3.8% in the third quarter. State and local government wages gained 1.0% last quarter, matching the gain in the July-September quarter. They rose 4.5% in the 12 months through December.
Benefits for all workers climbed 0.8%, matching the third quarter’s gain. They increased 3.6% in the 12 months through December after rising 3.7% in the July-September quarter.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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