According to the Employment Cost Index published by the Bureau of Labor Statistics (BLS) on Friday, compensation for American workers increased by 1.2% during the first three months of the year.
The BLS report indicated that workers’ compensation and business costs continue to provide justification for the Federal Reserve (Fed) to maintain its strategy of rate hikes.
The report on the increase in worker wages arrives just in time for the Federal Reserve to prepare for its May meeting, at which it will deliberate whether to raise its key interest rate again.
Analysts expected a 1.1% pay and benefit boost, but employees received 1.2%.
Annually, workers’ wages increased by 5.1% compared to March of the previous year, confirming that companies in the United States have confronted higher labor costs.
Thomas Simons, senior economist at Jefferies, stated, “The Fed needs a fairly substantial increase in unemployment to reduce overall aggregate demand, which would then lead to layoffs, less competition for labor, and lower wages.”
In March of last year, the annual rate of inflation was 5.0%, marking the ninth consecutive month of declines; however, the labor market may have been sufficiently robust for policymakers not to halt their rate rise.