The pace of U.S. wages and benefits crawled in the spring at a very low pace. It is actually the lowest in the last 33 years. This is clear evidence of the fact that strong hiring isn’t lifting wages for most Americans.
The employment cost index picked up only 0.2 percent between April-June quarter, after it’s increased by 0.7 percent in the first quarter, according to the Labor Department. Wages, salaries and benefits are tracked by the Index.
Since the second quarter of 1982, only small quarterly gains have been recorded. The salaries and benefits kept unchanged in the private sector too. It was certainly the weakest since government began tracking the data in 1980.
The figures are too disappointing after nearly two years of constant hiring. In the second quarter alone, the index rose by just 2 percent, which is alarming as compared to the last year.
The slowdown in wages confirms that the companies are still able to find the apt workers at minimal wages. The job market in the US is still not very healthy, provided there are an ample of hiccups in the wage growth. This would definitely compel the Federal Reserve Officials to vote for a delay in any increase in the short term interest rates they employ.
According to Jennifer Lee, an economist at BMO Capital Markets, “Despite a tighter labor market; and all of the stories about pay increases at various large firms, wage growth is not picking up meaningfully. This may not sit well with (Fed) policymakers.”
Around 3 million jobs have been added in the last year, which has lowered the unemployment rate to 5.3 percent in June. It is interesting to note that the unemployment rate was down from 65.1 percent 12 months ago.
If there is an increase in wages, the companies would try to cover those extra expenses by raising the price for their goods. This would in turn push for inflation and the Fed would try to raise the short term interest rates it has a control on.