Americans' Wages and Benefits Rise

WASHINGTON (AP) â€” Americans' wages and benefits rose solidly in the fourth quarter, wrapping up a year that posted the biggest annual gain in compensation costs since 1991. <br><br>The Labor Department

Thursday, January 25th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) â€” Americans' wages and benefits rose solidly in the fourth quarter, wrapping up a year that posted the biggest annual gain in compensation costs since 1991.

The Labor Department reported Thursday that its employment cost index, a closely watched gauge of inflation, rose a seasonally adjusted 0.8 percent in the last three months of 2000, down from a 0.9 percent rise in the third quarter. That reflected a job market that cooled late in the year from its earlier red-hot state.

A second report Thursday showed that sales of existing homes slipped by 7.4 percent in December to an annual rate of 4.87 million units, one of a series of reports showing how the economy has weakened sharply in the past two months.

Federal Reserve Chairman Alan Greenspan told Thursday that ``as far as we can judge, we have had a very dramatic slowing down. We are probably very close to zero (growth) at this particular moment'' in the first quarter.

Greenspan's comments were viewed as a further signal that the Fed, which announced a surprise half-point cut in interest rates Jan. 3, is prepared to lower rates further when it meets next week to make sure the country does not slip into a recession.

Many economists expected fourth-quarter compensation costs to register a 1.1 percent gain.

The wages and salaries component of the index, viewed by economists as the best measure of changes in workers' compensation costs, advanced by 0.7 percent in the fourth quarter, compared with a 0.8 percent rise in the third quarter.

The cost of benefits, such as health insurance, vacations and other perks, also moderated in the fourth quarter, rising 0.8 percent, compared with a 1.0 percent increase in the third quarter.

For the 12 months ending December, Americans' wages and benefits grew by 4.1 percent, the biggest increase since a 4.3 percent rise in 1991. Benefit costs led the way. Labor costs rose last year as employers scrambling to find qualified workers during much of the year, wooed them with higher wages and benefits.

Last year, consumer prices as measured by the Consumer Price Index rose 3.4 percent, suggesting that workers are posting gains in compensation even as they pay more for higher-priced energy products and other items.

While gains in wages and benefits are good for workers, economists and members of the Federal Reserve watch them closely to make sure they don't become inflationary. That was a prime concern when the Fed was raising short-term interest rates between June 1999 and May of 2000.

Now the Fed is worried that those rate increases may have slowed the economy too much. Earlier this month, the Fed unexpectedly cut interest rates by a half percentage point in an effort to prevent the weakening economy from slipping into a recession. Additional rate cuts are expected.

At the end of the year, there was a spate of troubling economic news â€” weak manufacturing activity, low consumer confidence low, disappointing holiday sales and slower job growth.

In December, the government reported that private payrolls edged up by just 49,000 during the month, ending a quarter in which monthly job creation in the private sector averaged just 84,000, the poorest showing since 1992 and just half the rate in the first nine months of the year.

In another report, the number of Americans filing new claims for state unemployment insurance rose last week by a seasonally adjusted 12,000 to 316,000, suggesting that employers demand for workers waned a bit. The increase came after a big drop in claims â€” by 40,000 â€” the week prior.

The more stable four-week moving average of claims fell last week to 336,000, the lowest point since Nov. 18, 2000, when claims were at 331,250.

For the week ending Jan. 13, 37 states and territories reported increases in jobless claims, while 16 reported decreases. The state data lag a week behind the national figures and is not seasonally adjusted.

California reported the biggest increase in claims, up by 11,850. Officials blamed the rise on layoffs in the trade, service and agriculture industries.