Worker pay in US rose 0.6% in Q4 as forecast

Protesters calling for higher wages outside a McDonald's restaurant in Oakland, California.
Protesters calling for higher wages outside a McDonald's restaurant in Oakland, California.PHOTO: REUTERS

NEW YORK (BLOOMBERG) - Wages and salaries in the United States rose in the fourth quarter at the same pace as in the previous three months, indicating gradual tightening in the labour market has yet to put pressure on employers to boost pay.

The 0.6 per cent advance in worker paychecks matched the increase in the third quarter, the Labor Department said Friday. The agency's employment cost index, which also includes benefits, climbed 0.6 per cent in the fourth quarter from the prior three months, matching the median forecast of 60 economists surveyed by Bloomberg.

Steady payrolls growth and joblessness lingering close to a seven-year low are projected to prompt employers to boost wages as they vie to attract and keep skilled workers. Signs of a long-awaited pickup in wage growth would give Federal Reserve policy makers greater confidence that inflation will rise toward their 2 per cent goal.

"The long-awaited acceleration in compensation growth has not yet arrived," Dana Saporta, director of U.S. economics research at Credit Suisse Securities LLC in New York, said before the report.

"If the labour market remains as strong as it has been, I do expect wages will start going up."

Bloomberg survey forecasts for the ECI ranged from unchanged to 0.9 per cent increase. 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 per cent of total employment expenses. The ECI data help color the outlook for worker pay after the December employment report showed hourly earnings were US$25.24 on average, down one cent from the prior month. They climbed 2.5 per cent from a year earlier, less than the 2.7 per cent gain projected in the Bloomberg survey of economists.

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, advanced 2.1 per cent from the same period in 2014, the same as in the third quarter.

Private wages rose 0.6 per cent in the fourth quarter from the previous three months, when they increased 0.7 per cent. Pay for state and local government workers advanced 0.4 per cent.

Benefit costs for all workers, which include some bonuses, severance pay, health insurance and paid vacations, climbed 0.7 per cent, reflecting a jump among state and local government employees. Compared with the same three months in 2014, benefit expenses were up 1.3 per cent.