U.S. Employment Costs Rise 0.6% in Fourth Quarter

Compensation for American workers grew at a slower pace in the fourth quarter, but picked up strongly for the year as a whole, signaling historically low unemployment might be starting to put upward pressure on wages and benefits.

The employment-cost index, a measure of wages and benefits for civilian workers, rose a seasonally adjusted 0.6% in October through December, the Labor Department said Wednesday, matching expectations of economists surveyed by The Wall Street Journal.

Wages and salaries, which account for 70% of total compensation, rose 0.5% from the prior quarter. Benefit costs -- which include health coverage, retirement benefits and paid leave -- advanced 0.5%.

The total index increased 2.6% over the past year, matching the largest annual increase since 2015, when compensation also increased at a 2.6% rate. Growth in the index hasn't exceeded 2.6% since 2008.

Private workers saw compensation rise 0.5% in the fourth quarter, a slowdown from the previous quarter. Meanwhile, state and local government workers saw compensation pick up in the fourth quarter to a 0.8% increase.

The rise in overall costs suggests employers may be feeling pressure to raise wages or boost benefit offerings as the supply of available workers shrinks. The unemployment rate has remained at a 17-year low for three months.

Other metrics have pointed to modest wage growth. Average hourly earnings for private-sector workers rose 2.5% in December from a year earlier, the Labor Department reported earlier. This is similar to the pace maintained over the past three years.

The Labor Department's report on the employment cost index can be found at: http://www.bls.gov/news.release/eci.toc.htm.

Write to Sarah Chaney at sarah.chaney@wsj.com and Josh Mitchell at josh.mitchell@wsj.com

(END) Dow Jones Newswires

January 31, 2018 08:45 ET (13:45 GMT)