Wage Costs Inch Up; Orders for Goods Jump

WASHINGTON —  The pay and benefits of U.S. workers rose moderately in the second quarter of the year, the government said Thursday in a report that may give some comfort to the inflation-wary Federal Reserve as it ponders the need for further interest rate rises.

But in a separate report, the government said soaring demand for commercial aircraft helped boost June orders for costly manufactured goods by the sharpest rate in nine years, indicating the nation’s industrial sector might be speeding up instead of slowing.

The reports provided a mixed bag for financial markets, showing that while growth in the world’s biggest economy remains robust, inflation still appears to be under control.

That could help steady the Fed’s hand when it meets Aug. 22 to discuss interest rates, analysts said. Still, they noted policymakers most likely would want to see further evidence of the much-awaited U.S. economic slowdown before calling an end to their year-long rate rise campaign.

“They will probably stay on the sidelines in August, but will be forced to pull the trigger again later in the fall,” Anthony Karydakis, senior economist at Banc One Capital Markets in Chicago, told Reuters Television.

Inflation-sensitive Treasury bond prices slipped after the release of the numbers, while U.S. stock prices were mixed.

The Labor Department said its closely watched Employment Cost Index, a broad gauge of what employers pay in wages, salaries and benefits, rose 1% in the three months ended in June.

That gain was below both the 1.4% increase in the first quarter and the 1.1% rise forecast by economists for the second quarter.

“It shows, despite the concerns, overall labor cost pressures remain moderate,” Karydakis said.

Meanwhile, the value of orders for durable goods--items like airplanes and refrigerators intended to last three years or more--shot up 10% to $243.16 billion in June after an upwardly revised jump of 7% in May.

That was the biggest monthly orders gain since a 13.9% increase in July 1991, shortly after the last recession ended, and was sharply contrary to Wall Street analysts’ forecast for a slim 0.1% rise in June orders.

Every category of manufactured goods saw order increases in June, with the largest gain seen in transportation goods, which jumped a record 43% to $69.1 billion after a 6.8% rise in May. The department said most of the transportation orders increase was for new aircraft and parts.

The monthly report on durable goods is highly volatile, since orders for items like airplanes often come in batches and are for big dollar amounts.