Employment costs rise at slowest pace since 1982

Employment costs rose by the smallest amount on record in the 12 months ending in September, as high unemployment restrained wage and benefit growth. The data shows that employers face little pressure to raise pay, even as the economy recovers. The weak labor market makes it difficult for people with jobs to demand higher pay and benefits. The Labor Department said Friday that the cost of wages, health care and other benefits increased by 1.5 percent in the year ending in September, the smallest increase since such records began in June 1982. That's down from a 2.9 percent rise in the 12 months ending in September 2008, and lower than the 1.8 percent yearly increase reported in the second quarter. The department's Employment Cost Index rose by a seasonally adjusted 0.4 percent in the July-September quarter, the same increase as the second quarter. That matched analysts' expectations. Economists monitor the index for signs that rising wages could push up inflation, but few analysts see any sign of that happening. Many economists believe that the Federal Reserve will not begin worrying about inflation and the need to boost interest rates until the unemployment rate begins to drop. The Commerce Department said Thursday that the economy grew at a 3.5 percent pace in the third quarter, snapping a record streak of four straight quarterly declines. But the economy isn't growing quickly enough to spur much hiring. The unemployment rate reached 9.8 percent in September, a 26-year high, and many economists expect it to peak above 10 percent early next year. The recession also has caused many companies to cut wages and benefits. The department's report said that private-sector wages and salaries rose by 1.4 percent in the year ending in September, the smallest increase on record. But the report showed that health care costs for employers is rising. The cost of health benefits increased by 4.7 percent in the 12-month period, more than the 3.9 percent rise in the year ending in September 2008.