Fed’s Q4 Wage Inflation Measure Rises Slower Than Expected, Showing Signs of Easing Wage Growth

The U.S. Bureau of Labor Statistics released its Employment-Cost Index (ECI) for the fourth quarter of 2020, showing a slower-than-expected rise in wages.

According to the report, the ECI, which measures the overall cost of labor, rose 0.6% in the fourth quarter of 2020, compared to an expected 0.7%. This suggests that wage inflation, a key measure watched by the Federal Reserve, is slowing down.

The ECI report also showed that wages and salaries, which make up 70% of employment costs, rose 0.6% in the fourth quarter, slightly below the 0.7% expected by economists. The report also showed that benefits, which make up the remaining 30%, rose 0.7%, in line with expectations.

The slower-than-expected wage growth is likely to be welcomed by the Federal Reserve, which has been keeping a close eye on wage inflation as it considers raising interest rates.

Analysts have suggested that the slower wage growth could be attributed to the coronavirus pandemic, which has had a major impact on the labor market. Many businesses have been forced to reduce their payrolls, while others have implemented wage freezes or wage cuts.

The slower wage growth could also be attributed to the fact that many workers are still uncertain about their job security, meaning they are reluctant to demand higher wages.

The slower wage growth could also be a sign that the labor market is beginning to recover from the pandemic, as more businesses are reopening and hiring again.

Overall, the Employment-Cost Index report suggests that wage inflation is slowing down, which could be a good sign for the Federal Reserve as it considers raising interest rates.