Washington, DC, July 28, 2006--Compensation costs rose 0.9% in the second quarter, according to a Labor Department report.
It was the biggest gain in the employment cost index since the first quarter of 2005.
The rise was above expectations. Economists had forecast a 0.8% increase in the employment cost index, considered one of the best measures of labor-cost pressures.
Wage and salaries rose 0.9% in the second quarter after rising 0.7% in the first quarter. This was the largest increase since the first quarter of 2003.
Benefits rose 0.8% in the second quarter, up from a 0.5% rise in the first quarter.
Over the past year, employment costs have increased 3.0%, up from 2.8% in the first quarter. Wages and salary costs have increased 2.8% in the past year, up from 2.7% in the first quarter. Benefit costs increased 3.4% in the second quarter, the same pace as the first quarter.
Employment costs are a major cause of worry for the Federal Reserve. The central bank theorizes that inflation can only be sustained if workers force their bosses to pay higher compensation, which is then passed on to customers in the form of higher prices.
For private sector workers, the ECI increased 0.8% in the second quarter, as wages moved up 0.9% and benefit costs rose 0.7%.
Measured over the past year, the ECI for private sector workers is up 2.8%, compared with a 2.6% rise in the first quarter and a 2.5% rise in the same quarter last year.
For state and government workers, compensations accelerated to a 1.1% gain, up from a 0.5% rise in the first quarter.
Over the past year, the ECI for government workers is up 3.8%, up from 3.7% in the first quarter
