Estimates of US labour cost growth revised lower
By Alexander Bueso
Date: Tuesday 10 Dec 2024
(Sharecast News) - Labour cost growth in the States over the half year ending in September undershot economists' forecasts, likely signalling that a further reduction in inflation was on the cards.
According to the US Department of Labor, in seasonally adjusted terms non-farm labour productivity increased at a quarterly annualised pace of 2.2% in the third quarter.
That matched a preliminary estimate.
Unit labour cost growth on the other hand was revised lower to 0.8% (Preliminary: 1.9%).
So too unit labour costs for the second quarter, which were now estimated to have increased by 1.1%, instead of the 2.4% rise previously estimated.
Hourly compensation was up by 3.1% in the third quarter and by 1.8% in real terms.
Nancy Vanden Houten at Oxford Economics said that Tuesday's revisions to labour cost estimates lowered the year-on-year rate of increase in Oxford's US wage growth tracker from 4.2% previously to 4.1%.
"In recent history, wage growth of 3.5% has been considered consistent with inflation at the Fed's 2% objective, but with trend productivity faster, we think wage growth in a range of 3.5% to 4% is consistent with that target."
Vanden Houten was anticipating that the Fed would skip a rate cut in January, but then go on to reduce officials short-term interest rates thrice over the course of 2025.
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