WASHINGTON (Reuters) – U.S. labor costs increased moderately in the third quarter, suggesting inflation could stay muted for a while and allow the Federal Reserve to keep interest rates near zero as the economy gradually recovers from the COVID-19-induced recession.
The Employment Cost Index, the broadest measure of labor costs, rose 0.5% last quarter after advancing by the same margin in the second quarter. That lowered the year-on-year rate of increase to 2.4% from 2.7% in the second quarter.
The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack and a predictor of core inflation as it adjusts for composition and job quality changes. Last quarter’s increase in the ECI was in line with economists’ expectations.
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