Inflation leads to a record drop in workers’ compensation

Total compensation costs for civilian workers fell 3.7% over the past 12 months ending in March, then Accounting for inflationaccording to the Employment Cost Index report published on Friday.

It’s the biggest drop since the Bureau of Labor Statistics began inflation-adjusted records in 2001. What’s more, it comes at a time when compensation costs — which include wages paid by employers as well as health, retirement and other benefits — are rising rapidly, before inflation. , where employers try to fill positions and retain their employees.

The data, which tracks changes in employers’ labor costs, quantifies how much pain people are feeling as prices rise faster than they have in the past 40 years. The increasing cost of foodAnd gasoline And Residence They eat off the workers’ salaries.

Inflation-adjusted cost of wages and salaries fell 3.6%, while benefits costs fell 4.2%, the two largest declines since the series began 21 years ago.

“For workers, that’s bad news,” Jason Furman, a Harvard economics professor and former chair of the Obama administration’s Council of Economic Advisers, said of the inflation-adjusted data. “Wages are dropping very quickly over the past year and are much lower than they were two years ago.”

Costs are rising quickly before inflation is factored in

However, at the same time, the The job market is very tight It forces employers to raise wages and benefits to attract and retain workers. This adds to concerns about the duration and spread of inflation.
Federal Reserve Chairman Jerome Powell referred to the employment cost index data as a factor in the central bank resolution raise interest rates last month for the first time since 2018.

Civilian workers’ compensation costs increased by a larger-than-expected 1.4% for the first quarter of 2022, before adjusting for inflation, according to the index. The cost of wages and salaries rose 1.2% and benefits costs jumped 1.8% from December.

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Looking at the last year ending in March, the unadjusted compensation cost was up 4.5%, compared to 4.0% for the 12-month period ending in December.

The cost of wages and salaries increased 4.7% compared to 4.5% for the year ended December, and benefits costs increased 4.1% compared to 2.8%.

The latest compensation report likely to keep the Fed in very tough tempersaid Kathy Bostancik, chief US economist at Oxford Economics. It expects the central bank to raise interest rates by another 50 basis points at policy meetings in May and June.

“What they worry about is that this high inflation has been going on for so long that if it starts to seep into the expectations of consumer companies, it will be more difficult to wrest inflation out of the system than just waiting for supply chains to correct,” she said.

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