U.S. labor costs rose sharply in the second quarter as a tight labor market continued to bolster wage growth, which could keep inflation high for a while.
The employment cost index, the broadest measure of labor costs, rose 1.3 percent last quarter after accelerating 1.4 percent in the January-March period, the Labor Department said Friday.
Economists polled by Reuters had forecast the ECI to rise 1.2% in the second quarter. Labor costs rose 5.1% year-on-year after rising 4.5% in the first quarter.
The ECI is widely regarded by policymakers and economists as one of the best measures of labor market slack and as a predictor of core inflation as it adjusts for changes in labor composition and quality. It is being watched closely for signs of whether wage growth has peaked as economists and investors try to gauge the pace of the Federal Reserve’s rate hikes.
Source: Capital
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