- Jacob Oubina, senior U.S. economist at RBC Capital Markets
US labour costs rose in the third quarter as the jobs market continued to tighten. The Employment Cost Index climbed 0.6% following a 0.2% increase in the second quarter that was the smallest gain on records, according to the Labor Department. Companies are trying to attract or retain skilled workers as the world's number one economy continues to grow and the unemployment rate hovers near levels consistent with full employment. A sustained pickup in wage growth would help bring inflation closer to the Fed's goal as policy makers consider hiking interest rates. Yet, labour costs remained well below levels that would push consumer prices closer to the Fed's 2% goal. In the 12 months through September, labour costs rose 2.0%, still below the 3% threshold that economists say is necessary to bring inflation closer to the target.
Meanwhile, the price index of personal consumption expenditure excluding food and energy, ticked up 0.1% in September, missing market's expectations for a 0.2% gain. The sluggish monthly increase left the so-called core deflator, the Fed's preferred measure of inflation, just 1.3% higher than a year ago.
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