Key Takeaways
- Companies’ cost to employ workers grew 0.9% in the second quarter.
- Thats less than the prior quarter and less than what economists expected.
- As hiring has slowed, employers have to compete less to attract workers.
As the job market continues to soften, slower hiring spurred sluggish wage growth in the second quarter.
Employers paid 0.9% more for labor in the second quarter, according to the employment cost index (ECI) data released by the Bureau of Labor Statistics Wednesday. That’s lower than the prior quarter’s increase of 1.2% and the 1% increase that economists were expecting to see.Â
It’s another sign that the labor market coming back into balance and workers are losing the upper hand. Since 2021, workers’ wages grew as employers competed to fill open positions. At one point, there were as many as 2 open positions for every unemployed worker.
However, hiring has slowed since the start of this year and wage growth has slowed along with it. And the softening in the job market hasn’t gone unnoticed.
Federal Reserve officials have said they are paying more attention to changes in hiring as part of their monetary policy deliberations. Wednesday’s report gives the Fed even more reason to cut interest rates in September, economists said.
“With the ECI the Fed’s preferred barometer of labor costs growth, today’s data mark an important step toward the FOMC gaining ‘greater confidence’ that inflation is cooling sufficiently to begin reducing the fed funds rate,” wrote Wells Fargo Economists Sarah House and Michael Pugliese.