U.S. workers received their biggest pay increase in nearly a decade over the period from July 2017 to June, according to Labor Department figures released Tuesday.
The department’s employment cost index, which tracks the growth of employee compensation across the economy, rose 2.8 percent in the year to June, the strongest 12-month gain since September 2008. Wages and salaries, which account for about 70 percent of employment costs, also rose 2.8 percent over the same time period.
The wage gains come as the national unemployment rate has fallen to about 4 percent, down from nearly 10 percent at the height of the Great Recession. As the labor market has tightened, business have had to boost salaries and benefits to attract and retain workers.
Wage growth has now reached levels last seen during the relatively high growth period from 2001 to 2007, when the employment-cost index increased 2.9 percent a year on average, according to the Wall Street Journal. Until recently, significant wage growth was largely missing from the economic recovery, with average hourly earnings increases more or less keeping pace with inflation.
Positive news about wage growth was tempered somewhat by government data that showed a modest uptick in inflation. The Commerce Department’s index for personal-consumption expenditures, which measures price changes in consumer goods and services, was up 2.2 percent in June from a year earlier, slightly above the Federal Reserve’s year-over-year target of 2 percent.
Indications of rising prices come as the Federal Reserve’s Open Market Committee meets in Washington this week. Central bankers are expected to leave the benchmark federal-funds rate — currently targeted for 1.75 to 2 percent — unchanged this session.
Federal Reserve officials generally hold the position that modest and consistent inflation is needed to maintain steady economic growth.