Employment cost growth: The sweet spot

Wells Fargo Research Team Wells Fargo

Summary

The latest reading on employment costs should boost policymakers' confidence that the labor market is no longer a threat to returning inflation to 2%. The Employment Cost Index advanced at a 3.2% annualized rate in the third quarter, bringing the one-year change in wages & salaries and benefit costs down to 3.9%. Amid a pickup in productivity growth this cycle, that leaves labor compensation rising at pace consistent with both the Fed's inflation goal and solid real earnings for workers.

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Wells Fargo Research Team

Wells Fargo

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