This Just In ...
Pay and Benefits Costs See Small Bump Up in Q4
Compensation costs for U.S. workers saw a slight uptick in growth in the fourth quarter of 2024, according to new data from the Bureau of Labor Statistics (BLS) released on January 31st. The Employment Cost Index (ECI), which measures changes in wages and benefits, rose 0.9% in Q4 after increasing 0.8% in Q3.
Higher Compensation Aligns with Inflation Trends
The small rise aligns with recent trends of creeping inflation, which has ticked up after showing some moderation earlier in 2024. Meanwhile, average hourly earnings growth also accelerated slightly, rising from 3.7% year-over-year in Q3 to 3.9% in Q4. Experts said this signals that compensation pressures, while not as high as in late 2023, will remain an issue for employers this year.
Wages and Salaries Outpace Benefits
In Q4, wages and salaries rose 0.9% while benefit costs were up 0.8%. Over the last 12 months, total compensation costs increased 3.6%, on par with Q3’s rise. Wages and salaries were up 3.7% year-over-year, while benefit costs grew 3.3% over the same period.
State and Local Government Workers See Larger Gains
For state and local government employees, total compensation costs grew 4.7% year-over-year, matching the prior quarter’s increase, thereby continuing the trend of stronger wage growth for public sector workers compared to private industry employees.
Fed Decision Reinforced by Data
Experts said the slight acceleration of compensation costs backs up the Federal Reserve’s recent decision to keep interest rates unchanged to assess further economic data. Fed Chair Jerome Powell has cited lingering inflation pressures as one reason for holding rates at 4.25- 4.5%, along with solid economic expansion, low unemployment, and a desire to see more disinflation progress.
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