US wages and benefits grew in the spring at the slowest pace in 33 years, stark evidence that stronger hiring isn’t lifting paychecks much for most Americans.
The slowdown also likely reflects a sharp drop-off in bonus and incentive pay for some workers.
The employment cost index rose just 0.2 per cent in the April-June quarter after a 0.7 increase in the first quarter, the Labour Department said today.
The index tracks wages, salaries and benefits. Wages and salaries alone also rose just 0.2 per cent.
Both measures recorded the smallest quarterly gains since the second quarter of 1982.
Salaries and benefits for private sector workers were unchanged, the weakest showing since the government began tracking the data in 1980.
The disappointing figures come after the index had been pointing to a pickup in wage growth after nearly two years of steady hiring.
The index rose just 2 per cent in the second quarter compared with a year earlier. That is down from a 2.6 per cent increase in the first quarter, which was the biggest in nearly seven years.
In some occupations where bonuses are common, compensation fell sharply after spiking in the first quarter, including sales, professional services such as law and accounting, and management.
The employment cost index figures now match the sluggish pace of growth reported in the average hourly pay data that’s part of the monthly jobs report. Average hourly wages were up just 2 percent in June from a year earlier, the Labour Department said earlier this month.
The Federal Reserve watches the employment cost index closely for signs that wages are climbing. Strong increases could lead companies to raise prices for their goods to cover higher labour costs, boosting inflation.
That could make the Fed more likely to raise the short-term interest rate it controls. Consumer prices have been tame in the past year, though in recent months they have moved higher.
Yet another measure of pay, compiled by the Federal Reserve Bank of Atlanta, shows wages are accelerating. Hourly pay for a typical employee rose 3.2 per cent in June from 12 months earlier, according to the Atlanta Fed.
While that is double the annual pace of 1.6 per cent in February 2010, it is still below the pre-recession levels of about 4 per cent.