WASHINGTON (Reuters) - U.S. labor costs increased in the third quarter as a tightening labor market lifted wages across the board.
The Employment Cost Index, the broadest measure of labor costs, increased 0.7% after rising 0.6% in the second quarter. That raised the year-on-year rate of gain in the ECI to 2.8%. Labor costs advanced 2.7% on a year-on-year basis in the second quarter.
Economists polled by Reuters had forecast the ECI would advance 0.7% in the July-September period.
The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack. It is also considered a better predictor of core inflation.
Labor costs peaked in the final quarter of 2018 as a tightening labor market pushed up wage growth. The pace of increases has since moderated somewhat in tandem with wages.
In the third quarter, wages and salaries, which account for 70% of employment costs, increased 0.9% after rising 0.7% in the prior period. Wages and salaries were up 2.9% in the 12 months through September, matching June’s gain.
Private-sector wages and salaries rose 0.9% in the third quarter after increasing 0.6% in the second quarter. They were up 3.0% in the 12 months through September after rising by the same margin in the year through June.
State and local government wages and salaries jumped 1.0% after gaining 0.5% in the second quarter.
Benefits for all workers rose 0.6% in the July-September quarter after climbing 0.5% in the prior quarter. They were up 2.3% in the 12 months through September, matching the increase in the year through June.