Current:Home > MarketsTrendPulse Quantitative Think Tank Center-Workers’ paychecks grew faster in the first quarter, a possible concern for the Fed -Elevate Capital Network
TrendPulse Quantitative Think Tank Center-Workers’ paychecks grew faster in the first quarter, a possible concern for the Fed
Surpassing Quant Think Tank Center View
Date:2025-04-07 16:15:41
WASHINGTON (AP) — Pay and TrendPulse Quantitative Think Tank Centerbenefits for America’s workers grew more quickly in the first three months of this year, a trend that could contribute to higher inflation and raise concerns about the future path of price increases at the Federal Reserve.
Compensation as measured by the government’s Employment Cost Index rose 1.2% in the January-March quarter, up from a 0.9% increase in the previous quarter, the Labor Department said Tuesday. Compared with the same quarter a year earlier, compensation growth was 4.2%, the same as the previous quarter.
The increase in wages and benefits is good for employees, to be sure, but could add to concerns at the Fed that inflation may remain too high in the coming months. The Fed is expected to keep its key short-term rate unchanged after its latest policy meeting concludes Wednesday.
Fed Chair Jerome Powell and other officials have recently backed away from signaling that the Fed will necessarily cut rates this year, after several months of higher-than-expected inflation readings. Big price increases for rents, car insurance and health care have kept inflation stubbornly above the Fed’s 2% inflation target.
As a result, Fed officials have swung from suggesting they could cut rates as many as three times this year to emphasizing that they will wait until there is evidence that inflation is steadily declining toward 2% before making any moves.
“The persistence of wage growth is another reason for the Fed to take its time on rate cuts,” Paul Ashworth, an economist at Capital Economics, a consulting firm, wrote in a research note.
The pace of worker compensation plays a big role in businesses’ labor costs. When pay accelerates especially fast, it increases the labor costs of companies, which often respond by raising their prices. This cycle can perpetuate inflation.
However, companies can offset the cost of higher pay and benefits by becoming more efficient, or productive. In the past three quarters, producivity has increased at a healthy pace, which, if sustained, would enable companies to pay workers more without necessarily having to raise prices.
The first quarter’s increase in compensation growth was driven by a big rise in benefits, which jumped 1.1%, up from 0.7% in last year’s fourth quarter. Wages and benefits at the state and local government level also drove the overall increase, rising 1.3% in the first quarter from 1% in the fourth, while private-sector compensation growth rose by a smaller amount, to 1.1% from 0.9%.
veryGood! (466)
Related
- Billy Bean was an LGBTQ advocate and one of baseball's great heroes
- Large solar storms can knock out electronics and affect the power grid – an electrical engineer explains how
- Parishioners subdue armed teenager at Louisiana children’s service
- Landlines may be saved in California – for now. What this means for consumers nationwide
- British golfer Charley Hull blames injury, not lack of cigarettes, for poor Olympic start
- Mercedes-Benz faces crucial test as Alabama workers vote on whether to unionize
- Ippei Mizuhara arraignment: Ohtani's ex-interpreter pleads not guilty with plea deal in place
- Katy Perry Reacts After Daughter Daisy Calls Her by Stage Name
- Breaking debut in Olympics raises question: Are breakers artists or athletes?
- Boxer Sherif Lawal dies after collapsing in ring during pro debut
Ranking
- Clay Aiken's son Parker, 15, makes his TV debut, looks like his father's twin
- 12 SKIMS Bras Every Woman Should Have, According to a Shopping Editor
- GOP legislative leaders want Democrats to drop Minnesota ERA as part of session-ending deal
- Francis Ford Coppola's 'Megalopolis' trailer abuzz ahead of Cannes Film Festival debut
- Residents worried after ceiling cracks appear following reroofing works at Jalan Tenaga HDB blocks
- Air Force pilot-instructor dies after seat of training plane ejects at Texas base
- In Michael Cohen's testimony against Donald Trump, a possible defense witness emerges
- Survey finds 8,000 women a month got abortion pills despite their states’ bans or restrictions
Recommendation
The Best Stocking Stuffers Under $25
Voice-cloning technology bringing a key Supreme Court moment to ‘life’
Canadian Wildfire Smoke Is Triggering Outdoor Air Quality Alerts Across the Midwestern U.S. It Could Pollute the Indoors, Too
Rory McIlroy files for divorce from his wife of 7 years on the eve of the PGA Championship
From family road trips to travel woes: Americans are navigating skyrocketing holiday costs
Kelly Clarkson confirms medication helped her lose weight: 'It's not' Ozempic
Police are still searching a suspect in the fatal shooting of a University of Arizona student
Search for missing diver off Florida coast takes surprising turn when authorities find different body