Wages rose more slowly this spring, a sign that inflation may continue to slow

WASHINGTON — Wages and benefits for U.S. workers grew more slowly in the April-June quarter than in the first three months of the year, a trend that could contain price pressures and encourage Inflation Fighters at the Federal Reserve.

Compensation as measured by the government’s employment cost index rose 0.9% in the second quarter, compared with a 1.2% increase in the previous quarter, the Labor Department said. said Wednesday. This figure corresponds to that of the fourth quarter of last year, the slowest in about two and a half years. Compared with the same quarter of the previous year, the growth in remuneration was 4.1%, slightly down from 4.2% in the first quarter.

Higher wages and benefits are good for employees, but slower wage growth will likely reassure Fed policymakers that inflation is gradually falling back toward their 2% target. Rapid wage growth can lead many companies to raise prices to offset rising labor costs.

Inflation is also slowing, which explains the acceleration in the growth of wages and social benefits, adjusted for price changes. Wages adjusted for inflation rose by 1.1% compared to the previous year in the second quarter, compared with 0.8% in the previous three months.

The Fed is expected to keep its short-term policy rate unchanged after its final policy meeting concludes later Wednesday. Still, Fed officials are also likely to report that the first rate cut in four years is on the horizon, likely at its next meeting in September.

There were other signs of a softening labor market on Wednesday. Payroll service ADP said U.S. nongovernment employment rose 122,000 in July, down from 155,000 in June. Its wage index rose 4.8% from a year earlier, but that was still the smallest gain in three years.

“With wage growth slowing, the labor market is playing into the hands of the Federal Reserve in its efforts to slow inflation,” said Nela Richardson, chief economist at ADP. “If inflation does pick up, it won’t be because of jobs.”