Labor compensation costs in the U.S. for private industry workers, including pay and benefits combined, jumped 5.5 percent year over year in June 2022, up from a 3.1 percent annual increase a year earlier, the U.S. Bureau of Labor Statistics (BLS) reported on July 29 in its quarterly Employment Cost Index summary.
The BLS reported that:
- Wages and salaries for private-sector workers rose 5.7 percent for the 12-month period ending in June, up from a 3.5 percent increase a year earlier. At the end of the first quarter, the annual increase had been 5 percent.
- The cost of benefits in the private sector rose 5.3 percent for the same 12-month period, up from a 2 percent increase the year before. The annual increase at the end of the first quarter had been 4.1 percent.
The cost of wages and benefits for all civilian workers—private sector and state/local government—rose 1.3 percent during the second quarter and were up 5.1 percent for the year.
For full-time hourly employees, the Federal Reserve Bank of Atlanta tracked 5.4 percent hourly wage growth for the 12 months through June.
Rising pay and benefits spending is still trailing the rate of inflation by a fairly wide margin.
The value of "real" inflation-adjusted private wages and salaries fell 3.1 percent for the 12 months ending June 2022, and the inflation-adjusted value of employee benefits fell 3.5 percent for the same period, according to the Employment Cost Index report.
The consumer price index rose 9.1 percent year over year in June, a new 41-year high, the BLS separately reported on July 13.
Diane Swonk, chief economist at accounting and advisory firm Grant Thornton, tweeted that "Labor is large cost—we want it to rise for workers when can offset impact on inflation with productivity growth. That has not been the case recently."
Differences by Industry
Employment costs can differ significantly among industries. Among private industry occupations, compensation cost increases for the 12-month period ending in June ranged from 4 percent for construction and maintenance occupations to 8 percent for service occupations.
Forty-five percent of U.S. small businesses say they've stopped hiring new workers because of high labor costs and inflation, according to a July hiring report by Alignable, a small business referral network, based on a poll of 5,350 small business employers conducted May 10 to July 19.
Related SHRM Article:
U.S. Employers Boost Pay Budgets Despite Recession Concerns, SHRM Online, August 2022