Compensation cost growth for US workers slows in the fourth quarter of 2022

Compensation cost growth for US workers slowed at the end of 2022.

According to the US Department of Labor, in seasonally adjusted terms the quarter-on-quarter rate of increase in total compensation costs slowed from the quarterly annualised pace of 1.2% seen during the third quarter of the previous year to 1.0% in the fourth (consensus: 1.2%).

Wage and salary growth meanwhile slipped from 1.3% to 1.0% and that of benefits from 1.0% to 0.8%.

The slowdown however centred on the public sector, where compensation growth ratcheted down from 1.9% to 1.0% as the pace of increase in wages was nearly half that seen over the three months to September.

In the private sector on the other hand compensation growth dipped from 1.1% to 1.0% with wage growth slowing from 1.2% to 1.0%.

"We estimate that core private sector wages, ex-incentive pay, rose only 0.9%, slower than the headline wage numbers; the annualized rate was only 3.7%, putting wage growth back to a pace consistent with the 2% inflation target - or lower - if sustained in the medium term," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"The key message here is that Chair Powell’s oft-expressed fear of the risk of a wage-price spiral is no longer realistic."

-- More to follow --