US Labor Cost Growth Lags Inflation for Second Straight Quarter as Wages Cool

U.S. employment costs rose 0.8% in the third quarter, matching expectations and slowing from 0.9% in the second quarter, but the gain trailed inflation for a second consecutive quarter, eroding workers' purchasing power despite a broadly stable labor market. The Employment Cost Index, published Friday by the Bureau of Labor Statistics, rose 3.4% over the 12 months through September, unchanged from the year through June. Adjusted for inflation, third-quarter employment costs fell 0.4% year over year. Wages for nonfarm workers rose 0.7% in the quarter and 3.1% over the year, the slowest annual pace since 2021. Real wages fell 0.6% over the 12 months through September. Wage growth slowed across construction and leisure and hospitality, while annual pay gains for broader services jobs hit their lowest since 2016. Benefits continue to pressure employers: private-sector health benefit costs rose 6.4% over the year through September, matching the highest increase since 2005. Fed Chair Kevin Warsh, speaking Wednesday after the central bank held rates steady, said hiring is keeping pace with labor force growth and unemployment has changed little, though inflation remains elevated. The BLS releases the October jobs report next week.