10 December 2019

Worker Pay and Benefits Rise

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The numbers: A gauge that measures how much workers are compensated rose strongly in the fourth quarter and showed the fastest annual increase in pay and benefits in 10 years.

The employment cost index increased 0.7% in the fourth quarter, the government said Thursday. Economists polled by MarketWatch had forecast a 0.8% increase.

Compensation rose in 2018 at a 2.9% clip, up from 2.8%. That’s the biggest 12-month increase since the fall of 2008.

What happened: Wages rose 0.6% in the fourth quarter. They make up about 70% of employment costs.

Benefits make up the rest of worker compensation. They increased 0.7%.

The ECI reflects how much companies, governments and nonprofit institutions pay employees in wages and benefits.

Big picture: The cost of labor has risen steadily over the past few years as the U.S. labor market tightened, with unemployment and layoffs falling to the lowest levels in 50 years. The dwindling pool of skilled labor has forced companies to sweeten pay and benefits.

Yet higher labor costs still haven’t made a big dent in corporate profits or contributed much to higher inflation. Improved income gains for American households, meanwhile, have kept the U.S. on a stable growth path that’s resulted in a nearly record long economic expansion.

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