Compensation for U.S. workers rose just 0.2 percent in the second quarter, the Bureau of Labor Statistics reported Friday, dashing expectations for a sign that wage gains are finally accelerating.
Over the past year, compensation was up 2 percent.
The previous quarter had seen annual compensation growth of 2.6 percent, adjusted for seasonal variation, the best number of the recovery and well above previous readings of wage growth. Economists had expected a slight decline, however, as high wage growth in New England reversing itself. Wages were up in the region by over 6 percent in the first quarter, then down nearly as much in the second.
Friday's release, the Employment Cost Index, gives a more comprehensive view of workers' pay because it includes not just wages and salaries but also fringe benefits. It covers health insurance, retirement plans, bonuses and more.
Part of the difference between the quarters was bonus pay. Setting aside incentive-based compensation, annual growth slowed only slightly from 2.2 percent to 1.9 percent through June.
Fast growth in worker pay has been one of the missing ingredients in the labor market recovery that has seen the unemployment rate fall to near healthy levels.
At 2 percent annually, compensation gains through June are in line with the ceiling for wage increases throughout the recession.
Federal Reserve chairwoman Janet Yellen has said that a rate of 3 percent to 4 percent would be more healthy.
Friday's disappointing data is important not just because it reflects ongoing struggles for workers hoping for a raise, but also because federal policymakers, especially at the Fed, are watching it closely for an indication of where the U.S. economy is in the business cycle. The Fed, in particular, is determining when and how fast to raise interest rates later this year.
Further details of Friday's report showed that wages and salaries grew at a 2.1 percent clip through June, while benefits were up slightly less at 1.8 percent.
Some groups saw falling wages. Those included sales workers, people in information services, and people in business support services.
While wage and benefit growth has been disappointing, one silver lining is that they have outstripped low inflation in recent months.
Consumer prices were up just 0.1 percent over the year through June, as measured by the Consumer Price Index, thanks in large part to the collapse of oil prices over the past year. That means that while workers may not have been seeing big increases in their paychecks, that money has gone further at the pump and elsewhere.