US wage growth falls to record-slow pace in 2nd quarter

The yield on Treasury securities sank as the figures tempered expectations a firming job market would prompt the Federal Reserve to raise interest rates as early as September. The US labour market is fast approaching full employment.

The labour market otherwise appears to be progressing as hiring remains steady.

Mr. Green said that the Fed will have an “exact” interpretation of the report. In the manufacturing sector, compensation rose by 0.7 percent from a 0.5 percent in the first quarter. The slowdown also likely reflects a sharp drop-off in bonus and incentive pay for some workers. Commissions tend to inflate the compensation workers get at the beginning of the year, and therefore now that labor market slack has diminished, returns might start trending upward again.

Compensation in the services sector nudged up 0.1% in the second quarter, being up 0.6% in the prior period. The unemployment rate fell to 5.3 per cent in June – down from a peak of 10 per cent in October 2010 and within spitting distance of the 5 per cent to 5.2 per cent range the Fed considers the economy’s long-run average.

That tightening of the labour market, which is expected to eventually translate into faster wage growth, has helped to hold consumer sentiment at lofty levels over the past eight months.

Because the ECI tracks the same job over time, it removes shifts in the mix of workers across industries, which is a shortcoming of the hourly earnings figures.

Economists described this metric as being stable, as consumers remain confident that their incomes will rise in the coming two years. The dollar fell against a basket of currencies.

US stock futures rose slightly after the data, while prices for US Treasuries traded higher.

The country’s Employment Cost Index, which is the broadest measure of today’s labor costs, ticked up 0.2% during the second quarter, said officials from the Labor Department. Compensation in goods-producing sectors rose 0.7%. The median forecast projected a 0.6 per cent increase. Gross domestic product grew at a 2.3 per cent annual pace in the spring, up from the first quarter’s 0.6 per cent pace, the Commerce Department said Thursday.

Benefits rose 0.1 per cent in the second quarter, but economists said that was mostly because of changes to the definition of retirement benefits.

Federal Reserve Chair Janet Yellen and her colleagues are counting on rising wages to boost the economy and bring inflation closer to their 2 percent goal. On the other hand, Reuters said that while wage increases are trailing employment numbers indicators point to eventual hastening in wage growth.