Labor costs in the United States rose strongly in the third quarter on the back of strong wage growth, the latest indication that the Federal Reserve may keep interest rates high for quite some time.
The Employment Cost Index, which is the broadest measure of labor costs, rose 1.1% last quarter after rising 1.0% in the April-June period, according to the Labor Department on Tuesday.
Reuters economists had forecast the Employment Cost Index to rise 1.0%. Labor costs increased by 4.3% on a year-over-year basis after rising 4.5% in the second quarter. The report comes after news last week that the economy grew at its fastest pace in nearly two years in the third quarter.
The Employment Cost Index is widely referenced by policymakers and economists as one of the best measures of labor market constraints and an indicator of core inflation, as it adjusts for changes in the composition and quality of employment.
Federal Reserve policymakers are due to begin a two-day policy meeting on Wednesday. The US central bank is expected to keep interest rates unchanged on Thursday, as a recent surge in US Treasury bond yields and a sell-off in stocks have tightened financial conditions. Since March 2022, the Federal Reserve has increased the policy rate by 525 basis points to the current range of 5.25%-5.50%.