UNITED STATES NEWS

US wage growth slowed in the final quarter of 2022

Jan 31, 2023, 6:00 PM | Updated: Feb 1, 2023, 4:23 am

(AP Photo/Nam Y. Huh, File)...

(AP Photo/Nam Y. Huh, File)

(AP Photo/Nam Y. Huh, File)

WASHINGTON (AP) — Pay and benefits for America’s workers grew at a healthy but more gradual pace in the final three months of 2022, a third straight slowdown, which could help reassure the Federal Reserve that wage gains won’t fuel higher inflation.

Wages and benefits, such as health insurance, grew 1% in the October-December quarter compared with the previous three months. That marked a solid gain, though it was slower than the 1.2% increase in the July-September quarter.

Fed Chair Jerome Powell and economists consider the data released Tuesday, known as the employment cost index, to be the most comprehensive gauge of labor costs. Powell last year cited a sharp increase in the index as a key reason why the Fed accelerated its interest rate hikes.

Powell has said that he sees rapid wage gains, particularly in the labor-intensive service sector, as the biggest impediment to bringing inflation down to the Fed’s 2% target. When restaurants, hotels, veterinary clinics and other services companies raise pay, they often pass along those higher costs by charging their customers higher prices.

In last year’s first quarter, total worker compensation had jumped 1.4% — the most on records dating to 2001. Before then, quarterly compensation growth had rarely topped 1%.

On an annual basis, wages and benefits grew 5.1% in the fourth quarter compared with a year earlier. That matched last year’s April-June figure as the strongest such figure in the roughly two decades that the data has been tracked. With the unemployment rate matching a 53-year low, businesses rapidly raised pay to try to attract and keep workers.

But now, evidence increasingly suggests that the robust pay growth of the past year is slowing.

Strong wage gains, though beneficial for workers, tend to fuel high inflation. Unless companies achieve greater worker efficiencies or are willing to post lower profits, they typically pass their higher labor costs on to their customers by charging more. Those higher prices, in turn, elevate inflation.

Tuesday’s report of slower-growing labor costs, though the latest sign that inflation could continue to ease, won’t likely alter the Fed’s plans to further tighten credit in the short run.

“The Fed is still likely to keep raising interest rates at the next couple of meetings, but we expect a further slowdown in wage growth over the coming months to convince officials to pause the tightening cycle after the March meeting,” said Andrew Hunter, an economist at Capital Economics.

Last quarter, Hunter noted, wage growth slowed particularly sharply for restaurant, hotel and entertainment workers, a group that has enjoyed some of the biggest pay gains. With many companies in those industries struggling to fill jobs, pay and benefits grew 0.9% in the fourth quarter — exactly half its pace of the previous quarter. That suggested that labor demand is declining even in areas of the economy that remain most eager to fill jobs.

On Wednesday, Powell and his Fed colleagues are set to raise their benchmark interest rate by a quarter-point to a range of 4.5% to 4.75%, their eighth straight rate hike. But as inflation has cooled, the central bank has been boosting rates by smaller increments. Last year, the Fed raised its key rate by three-quarters of a point four times.

Overall inflation is steadily cooling, having eased to 6.5% in December compared with a year ago. That is down from a 40-year high of 9.1% in June. Powell’s concern, though, is that fast-growing wages will cause inflation to plateau at around 4% — still twice as high as the Fed’s target.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

United States News

Associated Press

NY judge imposes $15 million fine on unlicensed cannabis shops owner who says he gave free samples

LYONS, N.Y. (AP) — The owner of seven unlicensed cannabis shops in New York whose promotions included an Easter egg hunt has been fined more than $15 million after state officials complained he repeatedly ignored notices to stop operating without approval, authorities said. A state Supreme Court justice in Lyons, New York, imposed the fine […]

46 minutes ago

Associated Press

Artist who created Precious Moments figurines depicting teardrop-eyed children dies at the age of 85

CARTHAGE, Mo. (AP) — Sam Butcher, the artist who created the Precious Moments figurines depicting angelic teardrop-eyed children, has died. He was 85. The company said in a Facebook post that he died early Monday surrounded by family. It said his life’s mission was “to share God’s gift of love with the world.” No details […]

2 hours ago

...

KTAR Video

Video: Remembering the meaning behind Memorial Day

Jim Sharpe takes a look back in Thursday’s Sharper Point commentary and reflects on the true meaning behind Memorial Day. Video: Jeremy Schnell and Felisa Cárdenas/KTAR News

3 hours ago

Associated Press

Here’s what’s cooking for the three-course state dinner at the White House honoring Kenya

Here’s what cooking for Thursday’s White House state dinne r honoring Kenya. White House executive chef Cris Comerford says the main course is a “best of both worlds” combination of smoked short ribs and lobster. First Course Chilled Heirloom Tomato Soup Sourdough Crisps Arbequina Olive Oil Main Course Fruitwood-smoked Beef Short Ribs Butter-poached Lobster Citrus […]

4 hours ago

Associated Press

Justice Department says illegal monopoly by Ticketmaster and Live Nation drives up prices for fans

WASHINGTON (AP) — The Justice Department filed a sweeping antitrust lawsuit against Ticketmaster and parent company Live Nation Entertainment on Thursday, accusing them of running an illegal monopoly over live events in America — squelching competition and driving up prices for fans. The lawsuit, filed in federal court in Manhattan, was brought with 30 state […]

4 hours ago

Follow @ktar923...

Sponsored Content by Collins Comfort Masters

Here's how to be worry-free when your A/C goes out in the middle of summer

PHOENIX -- As Arizona approaches another hot summer, Phoenix residents are likely to spend more time indoors.

Sponsored Articles

...

Sanderson Ford

3 new rides for 3 new road trips in Arizona

It's time for the Sanderson Ford Memorial Day sale with the Mighty Fine 69 Anniversary, as Sanderson Ford turned 69 years old in May.

...

DISC Desert Institute for Spine Care

Sciatica pain is treatable but surgery may be required

Sciatica pain is one of the most common ailments a person can face, and if not taken seriously, it could become one of the most harmful.

...

Collins Comfort Masters

Here’s 1 way to ensure your family is drinking safe water

Water is maybe one of the most important resources in our lives, and especially if you have kids, you want them to have access to safe water.

US wage growth slowed in the final quarter of 2022