US: Labor costs not a significant risk to inflation yet - Wells Fargo

Data released today showed that employment costs, including benefits, rose 0.7% over the first quarter. A tight labor market should put further upward pressure on costs, but the trend remains sufficiently tame as to not set off inflation, explained analysts at Wells Fargo. 

Key Quotes: 

“Employment costs rose 0.7% in the first quarter, in line with the previous quarter’s gain. A tougher base comparison after a jump early last year led the index down to 2.8% on a year-ago basis.”

“Wages and benefits each increased 0.7%, which also marked a modest slowdown from recent gains. The private sector has led the moderation, as wages and benefit cost growth in the public sector have grown more rapidly over the past year.”

“With the labor market still tight, we expect to see labor costs pick up a bit in the coming quarters. However, the cooler rate of wage growth indicated by both the ECI and average hourly earnings measures in the first quarter suggests that that the overall trend remains fairly tame.”