Rise in benefits lifts US labor costs in first quarter
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A construction worker takes a break for a drink while working on a multi-unit residential housing building in Encinitas, California, U.S., October 6, 2025. REUTERS/Mike Blake
WASHINGTON, April 30 (Reuters) - Growth in U.S. labor costs increased slightly more than expected in the first quarter amid a jump in benefits, but wage growth was moderate against the backdrop of a softening labor market.
The Employment Cost Index (ECI), the broadest measure of labor costs, advanced 0.9% last quarter after rising 0.7% in the October-December quarter, the Labor Department's Bureau of Labor Statistics said on Thursday. Economists polled by Reuters had forecast the ECI would rise 0.8%.
Labor costs increased 3.4% in the 12 months through March, matching the gain in the year through December. Benefits surged 1.2% after increasing 0.8% in the fourth quarter. They rose 3.6% in the 12 months through March after increasing 3.4% in the year through December. The increase in benefits occurred in both the private and public sectors.
The ECI is viewed by policymakers as one of the better measures of labor market slack and a predictor of core inflation because it adjusts for composition and changes in job quality.
Despite last quarter's increase, the labor market is not a source of inflation. Job growth has slowed considerably amid headwinds from tariffs on imports and reduced labor supply because of an immigration crackdown.
The Federal Reserve left its benchmark overnight interest rate in the 3.50%-3.75% range on Wednesday, citing rising inflation concerns from the U.S.-Israeli war with Iran. Financial markets expect the U.S. central bank will keep interest rates unchanged well into next year.
Wages and salaries, which account for the bulk of labor costs, increased 0.8% in the first quarter after rising 0.7% in the October-December quarter. They advanced 3.4% on an annual basis after increasing 3.3% in the 12 months through December. Private sector wages and salaries gained 0.7% last quarter, matching the rise in the fourth quarter.
When adjusted for inflation, overall wages ticked up 0.1% in the 12 months through March after rising 0.7% in the fourth quarter.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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