Inflation Pressures Spread in U.S. Economy

Reimbursement for workers increased to a 10-year high in the second quarter of this year as inflation pressures continued to spread in the U.S. economy.

According to a Bureau of Labor Statistics released Tuesday, the employment cost index increased 0.6% for civilian workers in the three-month period ending in June. This brought the 12-month rate up to 2.8%, the highest level since 2.9% in the third quarter of 2008, amongst the financial crisis and the Great Recession.

Remarkable wage gains have been a missing part of the economic recovery, with average hourly earnings increases hardly keeping pace with inflation.

Andrew Hunter, U.S. economist at Capital Economics stated in a note “With the labor market tightening, stronger wage pressures should continue to feed through into higher inflation over the rest of this year.”

The index comes from a sample of 27,200 observations of some 6,600 private businesses as well as 8,000 observations from 1,400 government offices.

Wages and salaries increased 0.5% for the quarter and 2.8% for the 12-month period, while benefits cost increased 0.9% and 29%, respectively.

Private industry compensation went up 2.9%, which was a significant rise from the 2.4% recorded in June 2017. Government compensation rose 2.3% for the period, which was actually a decrease from the 2.6% gain recorded in June 2017.

In the industry, sales and related jobs recorded a 3.5% increase while transportation and material moving rose 3.4%. Hospital work showed the smallest increase at 2.2%.

Economist expect an increase of about 190,000 and a 2.7% rise in averge hourly earnings.

The Federal Reserve is planning to meet this week to talk about monetary policy. The central bank’s Federal Open Market Committee is expected to keep its standard interest rate target at between 1.75% and 2%, and wait until September for the next rise. However, committee members are presumed to watch the employment cost index closely.

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