(Bloomberg) – U.S. employment costs rose in the first quarter by the most since the final three months of 2007 as both worker pay and benefits accelerated, the Labor Department said Friday.

Key Points

· Employment cost index advanced 0.8% (forecast was 0.6%) after a 0.5% gain in the prior three months
· Wages and salaries also rose 0.8% in first quarter
· Benefits costs climbed 0.7% after rising 0.5%
· Total compensation, which includes wages and benefits, rose 2.4% over the past 12 months

Big Picture

[Image credit: Bloomberg]
[Image credit: Bloomberg]

The government’s quarterly read on employer costs offers another take on wage growth, which has gradually shown signs of picking up. The ECI, which measures employer-paid taxes such as Social Security and Medicare in addition to the costs of wages and benefits, has shown a fairly steady pace of increases. The sustained pickup is another sign of a tighter labor market that’s forcing businesses to compete for a dwindling share of available workers.

Other Details

· Wages and salaries rose 2.5% from year earlier, biggest year-over-year gain since second quarter of 2016
· Year-over-year gain in ECI was biggest in two years
· Benefit costs in private industry rose 1.9% from first quarter of 2016, biggest advance since 2015
Employer costs for health benefits rose 1.3% from year ago

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