Employee compensation in the United States slowed down in the second quarter due to weak commissions from sales, with analysts torn whether the weak data would prompt the Federal Reserve to raise interest rates or not.
Analysts interviewed by Reuters are convinced that the Fed will focus more on the improving job market instead of the dismal wage growth and thus raise rates. USA Today, meanwhile, reported that the data released by the U.S. Labor Department on Friday would make monetary authorities reconsider its plans to hike the cost of credit.
Citing data from the Labor Department, Reuters reported that the Employment Cost Index only inched up by 0.2 percent from April to June. It added that this was the smallest rise in this data since 1982, and much lower than the 0.7 percent jump in the second quarter.
The second quarter data was dragged down by small gains in incentive pay related to sales, which drove up worker compensation in the first quarter
USA.Today said economists are puzzled why wages are not rising despite unemployment rate already at 5.3 percent, near the 5 percent level that the Fed considers as full employment. On the other hand, Reuters said that while wage increases are trailing employment numbers indicators point to eventual hastening in wage growth.
"Labor market fundamentals are improving, job openings are at record highs, and slack on a steady downtrend. This is precisely how the Fed will interpret this report, even if the numbers here are atrocious," Eric Green, chief economist at TD Securities in New York told Reuters.
USA. Today, however, reported that data would make complicate the Federal Reserves' expected rate hike during its next meeting.
"Overall, this report will cause some concern at the Fed for the timing of the rate hikes, lowering the chances for a September rate hike," Ozlem Yaylaci of IHS Global Insight told USA.Today.
USA.Today said many economists see the Employment Cost Index as a more accurate indicator of wages as it includes benefits and excludes changes related to the mix of industries.
