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April 29 — Employees' compensation rose as much as forecast in the first quarter, showing the steady drop in unemployment has yet to prompt employers to sweeten paychecks, the Labor Department said April 29.
The 0.6 percent gain in the employment cost index from the prior three months followed a 0.5 percent increase in the fourth quarter that was smaller than previously estimated. Total compensation, which includes wages and benefits, climbed 1.9 percent over the past 12 months, the smallest gain in two years.
The rise in the ECI matched the median projection in a Bloomberg survey of economists. Forecasts ranged from increases of 0.4 percent to 0.8 percent. The gauge measures employer-paid taxes such as Social Security and Medicare in addition to the costs of wages and benefits.
Wages and salaries typically account for about 70 percent of total employment expenses. The ECI data help color the outlook for worker pay after the March employment report showed hourly earnings increased 0.3 percent from the prior month. The year-over-year increase was 2.3 percent, the same as in February.
Because the ECI tracks the same job over time, it removes shifts in the mix of workers across industries, which is a shortcoming of the hourly earnings figures.
Wages of all employees, including government workers, climbed 2 percent from the same period in 2015, the smallest 12-month gain in two years.
Private sector wages rose 0.7 percent in the first quarter from the previous three months, when they increased 0.6 percent. Pay for state and local government workers gained 0.4 percent.
Benefit costs for all nongovernment workers, which include some bonuses, severance pay, health insurance and paid vacations, climbed 0.5 percent last quarter and were up 1.2 percent from the same three months in 2015. That was the smallest year-to-year increase since the fourth quarter of 2009.
For more information, see Compensation and Benefits Library’s Bloomberg BNA's Wage Trend Indicator chapter.
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