It costs more for U.S. firms to pay their workers during 2016's fourth-quarter, but figures released Tuesday morning showed the jump was not as sharp as expected, reflecting steady wage growth and the smallest advance in benefits in more than a year.
The U.S. Labor Department's 0.5% advance in the employment cost index followed a 0.6% gain in the previous three months. Wages and salaries increased 0.5% for a second straight quarter, while benefits costs eased to 0.4%, the slowest pace since the second quarter of 2015.
Businesses are competing to attract or retain staff as the labor market faces a shortage of qualified workers and layoffs remain low. A sustained pickup in Americans’ paychecks could boost consumer spending, in addition to helping push inflation closer to the Federal Reserve’s goal.
The median forecast in an economist survey for the ECI called for a 0.6% increase, with estimates ranging from 0.5% to 0.8%. The gauge measures employer-paid taxes such as Social Security and Medicare in addition to the costs of wages and benefits.
The ECI rose 2.2% from a year earlier, compared with a 2.3% gain in the previous three months.
