US labour costs rise modestly, but error could distort data

WASHINGTON (REUTERS) - US labour costs rose less than expected in the first quarter and pointed to benign wage inflation, a potential sign the Federal Reserve has space to continue its monetary stimulus programme.

The Employment Cost Index increased 0.3 per cent in the first quarter, the Labour Department said on Tuesday. However, the data may have been distorted by an error found in benefits data for sales and office workers, the department said.

Workers' benefits rose 0.1 per cent during the quarter, the slowest pace since 1999. A Labour Department analyst said the data error probably did not have a major impact on that series.

The department said benefits data for sales and office jobs had been left out of the calculations for the increase in overall benefits.

Analysts polled by Reuters had expected a 0.5 per cent increase in overall labour costs. In the 12 months through March, compensation costs advanced 1.8 per cent.

The Fed has kept overnight interest rates near zero since late 2008 and it has tripled its balance sheet to about $3 trillion through purchases of securities, which are aimed at pushing longer-term borrowing costs lower.

Wages and salaries, which account for 70 per cent of employment costs, increased 0.5 per cent in the first quarter, up from a 0.3 per cent gain in the fourth quarter.

They were up 1.6 per cent in the 12 months through March.