Employment costs contained in third quarter as wage growth lags

WASHINGTON Wed Oct 31, 2012 8:32am EDT

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WASHINGTON (Reuters) - Labor costs rose modestly in the third quarter, pointing to benign wage pressures as the economy struggles to generate faster job growth.

The Employment Cost Index, which measures total employer compensation costs, increased 0.4 percent after rising 0.5 percent in the second quarter, the Labor Department said.

Economists had expected a 0.5 percent gain. Over 12 months, compensation costs rose 2.0 percent, the fastest since the end of 2011 and picking up from a 1.7 percent rise in the period through September.

During periods of strong economic growth, the Federal Reserve closely monitors the index for signs of wage inflation. Labor market weakness, marked by an 7.8 percent unemployment rate and below trend job growth, is keeping wage inflation muted.

Wages and salaries for civilians, which account for 70 percent of employment costs, rose 0.3 percent in the third quarter. They had increased 0.4 percent in the prior period.

Benefits rose 0.8 percent from July to September, the largest gain since the second quarter of 2011. Employment costs for private sector workers gained 0.4 percent during the quarter. Employer costs for health benefits increased 3.0 percent compared with the same period a year ago.

Employment costs for state and local government workers rose 0.3 percent, slowing from the second quarter's 0.5 percent increase. (Reporting By Lucia Mutikani Editing by W Simon)

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