US employment costs slow slightly in fourth quarter

Employment costs in the States slowed slightly over the three months ending in December, as benefit payments decreased.

Total compensation for civilian workers rose at a quarterly pace of 0.5% in the fourth quarter of 2016, down from a 0.6% pace over the prior three months.

Economists had forecast a quarterly rate of increase in the employment cost index of 0.6%.

Among private sector workers, employment costs also increased at a quarterly clip of 0.5%, the same as in the third quarter, while among state and local workers they rose at 0.5% pace, less than the 0.9% rise seen in the prior three months.

Versus a year ago, total employment costs slowed from a 2.3% year-on-year clip to 2.2%.

Total wages and salaries grew by 0.5% on the quarter, unchanged from the rate of expansion seen during the prior quarter.
Meanwhile, total workers' benefits on the other hand fell from 0.7% to 0.4%.

"Health benefit costs in the private sector rose 2.7% in the year to Q4, so they are falling as a share of business revenues, given nominal GDP rose 3.5% y/y.

"We doubt this can persist much longer, because the tight labor market will make it harder for firms to persuade employees to accept ever-higher deductibles and/or reduced coverage, while at the same time health service providers are trying to raise prices more quickly. For now, though, this ECI report offers nothing to Fed hawks, but will come as a modest relief to the doves," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.