Pay and benefits for America’s workers grew at the slowest pace in two and a half years, the Associated Press reports, a trend that could affect the Federal Reserve’s decision about when to begin cutting interest rates.
Compensation as measured by the government’s Employment Cost Index (ECI) rose 0.9% in the October–December quarter, down from a 1.1% increase in the previous quarter, the Labor Department said today. Compared with the same quarter a year earlier, compensation growth slowed to 4.2% from 4.3%.
The increase in wages and benefits was still mostly healthy, but the slowdown could contribute to the cooling of inflation and will likely be welcomed by Federal Reserve policymakers.
The Federal Reserve considers the ECI one of the most important gauges of wages and benefits because it measures how pay changes for the same sample of jobs. Other measures, such as average hourly pay, can be artificially boosted as a result of, say, widespread layoffs among lower-paid workers.
