US employment costs rise at fastest pace since end of 2007

Employment costs in the US rose in the first quarter at their fastest clip since the end of 2007, led by gains for both private sector wages and benefits.

The employment cost index increased by 0.8% quarter-on-quarter and 2.4% year-on-year, according to the Bureau of Labor Statistics.

Economists had penciled in an increase of 0.6% on the quarter.

In comparison to the prior quarter, gains in wages and salaries in the private sector accelerated to a quarterly pace of 0.9% from 0.5%.

Benefits also grew more rapidly, rising at a 0.6% quarter-on-quarter clip, which was up from 0.4%.

In the public sector on the other hand, the rate of growth in total compensation was unchanged at a 0.6% on the quarter, although in year-on-year terms they rose by 2.6%. which was up from 2.4% for the quarter ending in December.

"Excluding incentive-paid occupations, where the data are very volatile, the y/y rate of private wages and salaries has hit a new cycle high of 2.6%, after four straight quarters at 2.5%. One increase proves nothing, but with the unemployment rate falling below the Nairu you can expect Fed hawks to argue that that policymakers should not delay the next hike," says ian Shepherdson, chief economist at Pantheon Macroeconomics.