U.S. workers saw the largest increase in wages and benefits since September 2008, according to a new report from the Labor Department on Tuesday.
The employment cost index, a gauge of total compensation for civilian workers, increased 0.6% in the second quarter. The cost of pay and benefits jumped 2.8% in the 12-month period ended in June, the highest yearly growth rate in nearly a decade.
Wages alone gained 2.8% over the past 12 months, which also reflected a near 10-year high.
Growth in benefits outpaced wages in the second quarter. Wages were up 0.5%. Benefits, which cover health care, retirement plans and other items, jumped 0.9%. That marks the fastest pace in four years.
Meanwhile, private workers fared better than the public sector. Total compensation in the private industry rose 2.9%, while government workers saw a 2.3% increase.
In a separate report, the Commerce Department said the price index for personal consumption expenditures rose 2.2% year-over-year in June, another sign that inflation is trending higher. The Federal Reserve plans to raise rates two more times in 2018, bringing the annual total to four, to counter rising inflation.
Meanwhile, China’s top leaders pledged economic stability just as data from the world’s second-largest economy suggested that the country was starting to feel a pinch from U.S. tariffs.
In a statement carried by China’s state media after a meeting of the Politburo, a top decision-making body of the ruling Communist Party, Beijing said it will take targeted measures to solve issues in the economy.
The Chinese economy is facing “some new problems and new challenges,” said the statement carried by state-run Xinhua news agency.
“There are obvious changes in the external environment,” the statement added. It did not specifically mention China’s ongoing trade war with the U.S.
“We must do a good job in stabilizing employment, finance, foreign trade and investment, and expectations,” the statement added.
Analysts said the Politburo’s communication suggests that Beijing will be fine-tuning its economic policies. Some form of easing is expected.
“China’s top policy makers are clearly concerned about two issues: the sharp slowdown of credit growth and the uncertainty due to the trade war. As such, they called for more proactive fiscal policy and infrastructure spending,” Macquarie economists Larry Hu and Irene Wu wrote in a note.
However, Beijing will continue to keep a lid on debt, as the statement reaffirmed, the economists added. That could change if the employment situation in the country worsens.
“The statement also offers some clues as it mentioned stabilizing employment twice. In other words, if the unemployment problem becomes severe, a policy U-turn could happen from deleveraging to boosting growth. Clearly we are not there yet,” the Macquarie economists added.
Beijing’s economic growth target for 2018 is around 6.5 percent.
This year, China posted second-quarter GDP growth of 6.7 percent from a year ago, slightly lower than 6.8 percent in the first quarter of 2018.
Even before the ongoing trade dispute with Washington, the Chinese government was already managing a slowdown in its economy as Beijing cracked down on high debt levels and heavily polluting industries.
James E Windsor, Overpasses News Desk
August 1st, 2018