Wages, Benefits Rise 3.7 Percent

October 29, 1998

Wages, Benefits Rise 3.7 Percent

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Filed at 11:31 a.m. EST

By The Associated Press

WASHINGTON (AP) -- Wages, salaries and benefits paid to American workers rose by 3.7 percent over the past year, the biggest increase in more than six years.
The rise for the year ended in September shows workers still are benefiting from two years of robust economic growth, which slowed this spring as spillover from world financial turmoil hurt American trade.
But before that happened, unemployment sank to a 28-year low of 4.3 percent in April in May, forcing employers to increase compensation faster than inflation in order to attract and retain qualified workers.
During the year covered by today's Labor Department report, consumer prices rose just 1.5 percent. Compensation hadn't risen by more than the 3.7 percent registered in the latest period since the 12 months ended in March 1992. It rose 4 percent then, only modestly faster than the 3 percent inflation rate at the time.
However, today's report, which showed a larger-than-expected 1 percent compensation increase in the July-September quarter alone, reflected an unusually strong 1.9 percent jump in compensation at finance, insurance and real estate businesses during the quarter.
``This will change in the fourth quarter as the world financial crisis takes its toll on the industry,'' said economist Bill Cheney of John Hancock in Boston.
Nevertheless, the report raises questions for Federal Reserve Chairman Alan Greenspan and fellow monetary policy-makers. Last month, they began cutting interest rates in an effort to inoculate the American economy from the dampening impact of the global slump. However, until August, they had been poised to increase rates to slow the economy and prevent brisk wage increases from fueling price inflation.
``If the economy speeds up again, the employment cost index report suggests wages would spark a burst of inflation,'' Cheney said. ``You can be sure the index has not dropped off Alan Greenspan's radar screen.''
In a separate report showing labor demand remains strong despite the slowdown in overall economic growth, the department said the number of Americans filing first-time claims for unemployment benefits fell last week for the first time in four weeks. Claims dropped by 18,000 to a seasonally adjusted 301,000.
However, a four-week moving average of claims, which smoothes fluctuations in the volatile data series, rose to a 12-week high of 309,250, up from 306,500 for the period ending one week earlier.
Unemployment, though higher than the spring, remains low. It was 4.6 percent in September.
Wages and salaries have been increasing faster than benefits, rising 4 percent during the year ended in September, the most in seven years. Benefits increased 2.6 percent.
For the third quarter alone, wages and salaries rose 1.2 percent. That's the most since an identical increase in 1990. They haven't increased more than that since 1984.
Benefits increased 0.8 percent in the third quarter.

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