Pay and benefits for U.S. workers continued to grow modestly from July through September, suggesting that a still-shaky labor market is holding back compensation.
The employment-cost index rose 0.4% in the third quarter from the second, the Labor Department said Wednesday. Economists surveyed by Dow Jones Newswires expected a 0.5% gain.
Compensation grew 0.5% from April through June.
Wages and salaries, which account for about 70% of the index, grew 0.3% during the most recent quarter, but benefit costs rose 0.8%.
On a year-over-year basis, total employment costs rose 2.0%, with wages up 1.7% and benefits up 2.6%. As typical, health benefits drove the gain, rising 3.0% from a year earlier.
Soft demand for labor left workers with little bargaining power to pursue better salaries and benefits even as job creation improved during the third quarter. The unemployment rate fell to 7.8% in September, the lowest level since 2009.
Economists expect the jobless rate will rise to 7.9% when the government releases its October measure of the labor market Friday. They expect the report to show that the U.S. added 125,000 jobs during the month.
Still, compensation more than kept pace with mild prices increases the past 12 months. The personal-consumption-expenditures index, an inflation measure, rose 1.7% in September from a year earlier, according to a Commerce Department report this week.
Compensation among private-sector workers grew 0.4% in the third quarter, according to Wednesday's data. Wages rose 0.4%, while benefits grew 0.7%. Meanwhile, state- and local-government workers' compensation grew 0.3% as wages rose 0.2% and benefits increased 0.8%.
Local governments continue to wrestle with tight budgets. Overall outlays from state and local governments fell in the third quarter even as the federal government boosted spending.