The costs of employing a worker in the United States increased 0.8% in the fourth quarter, matching the third quarter's gain, the Labor Department reported Tuesday.
Wage costs increased 0.8% in the fourth quarter, the fastest increase since early 2000. Benefit costs rose 1.1%.
The 0.8% increase in the employment cost index matched expectations of Wall Street economists surveyed by MarketWatch.
In the third quarter, employment costs increased 0.8%, with wages up 0.6% and benefits rising 1.3%.
For all of 2005, the employment cost index increased 3.1%, the lowest since the 2.9% gain in 1996. The ECI increased 3.7% in 2004.
Employment costs are a major cause of worry for the Federal Reserve, which theorizes that inflation can only be sustained if workers force their bosses to pay higher compensation, which is then passed on to customers in the form of higher prices.
The data show the Fed has had nothing to worry about in the past 12 months. Real - that is, inflation-adjusted - compensation costs fell 0.3% in 2005, the first decline since 1996.
Real wages dropped 0.8% for the second straight year in 2005. Inflation-adjusted benefit costs increased 1.1% for the year.
The Federal Open Market Committee is expected to raise overnight interest rates at its meeting later Tuesday in a bid to keep inflationary pressures bottled up.
Anecdotal accounts show wage pressures are rising in some occupations with severe skill shortages.
The employment cost index is a broader measure of compensation costs than the separate series of data on average hourly and weekly wages, which cover only about 80% of U.S. workers. The ECI covers more workers and covers a greater range of compensation costs, including fringe benefits, bonuses and perks.
In private industry, compensation costs increases 0.8%, with wages up 0.6% and benefits rising 0.9%. For government workers, compensation costs increased 1.1%, with wages rising 0.9% and benefits increasing 1.5%.