September PCE report: Inflation data shows price rise moving toward 2%

Wages and benefits for U.S. workers rose in the third quarter by the least amount in more than three years, indicating labor costs continue to cool and pose less of an inflation threat.

The labor cost index rose 0.8 percent from July to September, the government said Thursday.

It was the second quarter in a row that the index rose by less than 1.0% The last time was in 2020.

The Federal Reserve considers the ECI to be the most accurate measure of labor costs and considers the ratio when raising or lowering interest rates.

The growth rate of workers’ compensation slowed to 3.9% in the third quarter from 4.1% in the second quarter and a post-pandemic peak of 5.3% in 2022. It is the slowest increase in three years .

Workers aren’t changing jobs as much to try to earn higher wages because hiring has slowed and a new job isn’t as easy to find. Businesses are also keeping a cap on wage increases to try to limit their own costs.

Fed Chairman Jerome Powell doesn’t think labor costs are adding upward pressure on inflation, but the central bank wants to see wages cool further.

Total compensation is still growing considerably faster than the 2.8% average from 2017 to 2019.

Wages and salaries rose 0.8 percent in the third quarter. They represent 70% of the labor cost index.

Benefits also increased by 0.8%.

Economists polled by The Wall Street Journal had forecast a 0.9% increase in the ECI in the third quarter.