Higher Employment Costs Raise Fresh Doubts on Inflation Progress
15 minutes ago
Total wages and benefits for employees rose 1.2% in the 2024 first quarter, a jump in the Employment Cost Index (ECI) from the 2023 last quarter. The data from the Bureau of Labor Statistics came in higher than the 1.0% economists surveyed by the Wall Street Journal and Dow Jones Newswire expected.
“Another quarter of strong pressures on the wages and salaries front—in the goods and services sectors—alongside a faster increase in benefits kept the headline rising at a faster clip,” wrote Oren Klachkin, markets economist at Nationwide Financial.
Economists said the report on compensation showed inflation continues to be a challenge for Federal Reserve officials trying to get it down from its current levels of around 2.7%. Higher wages can have an impact on inflation, where business owners raise prices on goods and services in order to meet the higher employment costs.
“We do expect wage growth and inflation to slow as the year progresses, but the Fed will need several months of good news on wage growth and inflation before it regains some confidence that inflation is back on a sustainable path to 2%,” wrote Oxford Economics’ Nancy Vanden Houten.
The Fed is meeting this week and is expected to keep interest rates unchanged. Investors have already pushed back expectations of an interest rate cut to later this year as Fed officials have said they are closely watching data on wages, inflation and economic growth.
“The acceleration in the ECI supports the narrative that the last leg down in inflation is going to be slow and uneven and reinforces our call for the Fed to remain on hold until September,” wrote Jay Hawkins, senior economist at BMO Economics.
-Terry Lane
Home Prices Kept Rising In February
1 hr 7 min ago
Home prices continued rising in February as the “lock-in effect” caused by high mortgage rates kept its grip on the housing market.
The national S&P CoreLogic Case-Shiller Home Price Index rose to a record high in February on a seasonally-adjusted basis, S&P Dow Jones Indices said Tuesday. The index has risen 6.4% over the last 12 months, the largest annual increase since November 2022.
The report added to recent data showing home prices rising despite high mortgage rates and costs forcing many buyers out of the market. The few buyers who can afford to make offers are competing for a small pool of listings, since many homeowners are reluctant to sell and give up ultra-low fixed mortgage rates they secured back when loans were cheaper, worsening a longstanding housing shortage.
“Following last year’s decline, U.S. home prices are at or near all-time highs,” Brian D. Luke, head of commodities, real and digital assets at S&P Dow Jones Indices said in a commentary. “Since the previous peak in prices in 2022, this marks the second time home prices have pushed higher in the face of economic uncertainty.”
