The employment cost index rose 1.1 percent in the quarter ended March 31 after rising 0.9 percent in the previous three months, the Labor Department said. Labor costs rose 4.1 percent in the 12 months ending in March. That compares with a 4.3 percent rise in the 12 months ending in March of last year. Slower economic growth may help contain labor costs in coming months, analysts said. Analysts expected a 1.1 percent increase in first-quarter employment costs, according to a Bloomberg News survey.
Labor costs account for about two-thirds of the final costs of goods and services.
Fed officials have lowered their target for the overnight bank lending rate by 2 percentage points to 4.5 percent since the start of the year to help boost growth. The economy expanded at a 1 percent annual rate in the fourth quarter. Greater Latitude' Benign inflation may give Fed policy makers room to keep lowering interest rates if needed. The employment cost index measures the cost to companies of employing a given worker at a given time, with adjustments to spread cost increases over the course of a year. Wages and salaries make up almost three-fourths of the index.