Wages, benefits rose at higher pace in ’14

Associated Press

WASHINGTON

Wages and benefits rose at a slightly healthier rate last year, a sign strong job gains could be forcing companies to pay a bit more for workers.

The Labor Department said Friday that the employment cost index, which measures pay and benefits, rose 2.2 percent in 2014, up from 2 percent the previous year. It’s also ahead of inflation, which rose 1.3 percent.

Yet the increase still is sluggish by historical standards. In a healthy economy, the index usually rises at about a 3.5 percent pace.

“While still quite tame, wages have picked up a little,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. “We expect more acceleration, especially if the unemployment rate falls some more, as seems highly likely.”

The employment cost index began to creep up last spring, increasing 0.7 percent in the second and third quarters. Wages and benefits rose 0.6 percent in the fourth quarter. The final three quarters of 2014 saw the strongest gains since the recession. And last year’s annual increase of 2.2 percent is the biggest calendar-year increase since 2008.

The Federal Reserve is closing watching wages as it considers when to raise the short-term interest rate it controls.