Americans' wages, salaries and other benefits jumped 5.2 percent over the past year, the government said Thursday in a report analysts took as a sign that wage inflation, although high, might be stabilizing. "There is no inflation relief or profit margin relief suggested by these numbers. The good news is there's no acceleration, either," said Allen Sinai, chief economist at the Boston Co.
Robert Dederick, chief economist at Northern Trust Co. of Chicago, said the 5.2 percent rise in the Labor Department's Employment Cost Index showed a disturbing, although stable, underlying wage inflation rate of about 5 percent.
The number makes it even more unlikely the Federal Reserve can ease its inflation-fighting campaign and lower interest rates, especially in light of the oil shock brought on by the Persian Gulf turmoil, Dederick said.
"The (Fed) authorities in all likelihood feel we should take a one-time price blow and not try to offset it with higher wages and salaries, because then you just start chasing your tail," Dederick said.
Analysts were encouraged that the 5.2 percent gain for the year ending in September was an improvement over the 5.4 percent rise for the 12-month period ending in June.
The Labor Department said the cost index, considered one of the best gauges of inflationary wage pressures, was pushed up by a sharp 6.8 percent rise in benefit costs for private industry workers.
The rapid spurt in benefit costs was due mostly to higher health insurance costs, non-production bonuses and worker's compensation insurance, the government said. Another factor was a January increase in the Social Security tax rate, the government said.
The Labor Department does not track health insurance costs alone, but union groups that have followed spiraling medical costs say health coverage costs have gone up by as much as 20 percent a year since 1987.
In another Labor Department report Thursday, the government said contracts settled so far this year through collective bargaining gave workers average annual wage increases of 3.3 percent over the life of the pacts. That was a big improvement over the 2.1 percent annual gains those workers got the last time their contracts were negotiated.
The employment cost report showed that wages and salaries for private industry workers climbed 4.2 percent, slightly less than the 4.3 percent increase recorded a year ago.
The 5.2 percent increase in all compensation costs for both private-sector and government workers was just above the 5.1 percent gain of a year ago, the government said.
Eventually, analysts expect the inflation brought on by higher oil prices to start showing up in wages and salaries as well, because workers will start demanding more compensation to make up for the drain on their wallets.
The report showed that over-the-year pay gains were about the same in the service-producing industries, where wages rose 4.2 percent, as in goods-producing industries, where wages rose 4.1 percent.
Non-union workers received better wage gains than their union counterparts, continuing a trend that began in 1983-84, the government said. Non-union workers' pay rose 4.4 percent, while union workers saw gains of 3.6 percent.
For state and local government workers, the 5.3 percent pay gains for the year ending in September 1990 were lower than the 5.5 percent increases of a year ago.