US employment costs rise 0.8% in the third quarter, matching forecasts
The gauge slowed from 0.9% in the previous quarter, giving the Fed's hawks no fresh evidence that pay is pushing inflation higher.
US employment costs rose 0.8% in the third quarter, exactly what economists had forecast and a notch below the 0.9% of the previous quarter. After weeks of inflation data that favoured the Fed's hawks, this is the first reading that does not.
The contrast is with the upstream numbers. Core producer prices jumped 0.7% in September, more than double forecasts, following a hotter-than-expected headline producer price reading and a consumer price surprise two weeks earlier. Those prints have tilted the debate toward the officials pressing for more tightening, and markets already price high odds of a move in December. A wage gauge that cools modestly gives that case no new fuel, but it takes none away either, so the pricing should stand undisturbed.
Pay is also behaving more calmly than hiring, which has whipsawed from one release to the next. Against that, a drift from 0.9% to 0.8% in labour costs looks like gradual cooling rather than a break.
That leaves the Fed's problem where it was. Inflation is running hot in the price data while the labour data is uneven, and a steady wage line does not settle which matters more. For a central bank leaning toward more tightening, the absence of wage acceleration is a reason for patience, not for relief.
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