Credit: Person shopping for groceries during high inflation — Mariana Nedelcu - Reuters / stock.adobe.com
U.S. labor costs saw their smallest quarterly gain in over three years during Q3, signaling a cooling in wage growth and reinforcing signs that inflation is easing. The Employment Cost Index (ECI), which measures labor costs comprehensively, rose 0.8% in the third quarter, below economists’ expectations of 0.9%. The annual increase in labor costs also decelerated, climbing just 3.9% through September, its slowest pace since 2021. This trend suggests that inflationary pressures are subsiding, aligning with the Federal Reserve's inflation target.
Wages and salaries, which comprise the majority of labor costs, also rose by 0.8% last quarter, a modest increase compared to previous quarters. Private sector wages mirrored this trend with a 3.8% annual increase, down from 4.1% in Q2, reflecting a broader trend of cooling wage pressures. Additionally, state and local government wages grew by 1.0% for the quarter, underscoring a slight deceleration across both private and public sectors.
Market Overview:
- Labor costs rose 0.8% in Q3, the smallest gain since Q2 2021.
- Annual labor cost growth decelerated to 3.9%, aligning with inflation targets.
- Fed expected to cut interest rates by 25 basis points next week.
Key Points:
- Wages and salaries rose 0.8% in Q3, consistent with easing inflation.
- Benefits for workers increased 0.8%, showing broader labor cost stability.
- Private sector wages grew 3.8% annually, down from Q2's 4.1% increase.
Looking Ahead:
- Fed’s interest rate cuts aim to support economic growth as inflation cools.
- Stabilizing labor costs may bolster consumer spending into 2024.
- Continued moderation in wage growth could ease market pressures further.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
