The amount of money it costs businesses to employ workers surged in the first quarter to the fastest rate since 2007, underscoring the upward pressure on wages in a tightening U.S. labor market and improved bargaining position for workers.
The employment cost index jumped 0.8% in the first three months of 2017, the Bureau of Labor Statistics said Friday. Economists polled by MarketWatch had expected a seasonally adjusted 0.6% increase.
The ECI is a closely followed gauge that reflects how much companies, governments and nonprofit institutions pay their employees in wages and benefits.
The index has grown 2.4% over the past 12 months, the fastest pace since 2015 and the second best showing since 2008.
Economists expect a shrinking labor market to eventually force companies to offer even higher wages or pay more to train employees if they want to expand staff to keep up with growth. The U.S. unemployment rate stood at just 4.5% in March, the lowest rate since before the Great Recession.
In the first quarter, wages advanced 0.8%, the government said. Wages represent about 70% of a company’s cost to employ its workers. Benefits increased 0.7%.