WASHINGTON — The wages and benefits of American workers so far this year have risen at their slowest pace in almost two decades, clouding what had been some of the brightest news about the current boom--its recent success at improving the lots of a broad swath of working people.
The government said its employment cost index, Washington's most reliable measure of what employers are paying in wages, salaries and benefits, rose a mere 0.4% in the first three months of the year.
That is barely half what had been expected and only half the pace at which it increased in the final three months of last year. And for the first time in at least two years, the latest wage and benefit gain was roughly canceled out by inflation.
Though Thursday's report does not measure such increasingly important compensation as stock options, the small rise could add to pressure that some observers see building for bigger wage increases. The push for higher pay already has begun in some industries, most visibly airlines, in which unionized employees are demanding a bigger share of the wealth after their wage concessions of the early 1990s.
"I think we are right on the cusp of wage pressure," said John Stanek, president of International Survey Research Corp., a Chicago company that plumbs employee attitudes.
But economists greeted the numbers with enthusiasm, calling it fresh evidence that inflation remains tame and noting it reduces the already slim chances the Federal Reserve would step in to slow the economy.
"It's hard not to interpret this as unmitigatedly good news for the macro-economy and investment. It suggests we can grow much faster than we thought we could without sparking any inflation at all," said William Cheney, chief economist of John Hancock Mutual Life Insurance Co. in Boston.
Though quarterly data can be volatile, the weak wage gains of the latest quarter suggest an abrupt change. Until this year, most workers' economic condition has been improving because, while wage gains have been moderate, inflation has been even slower, which means that whatever gains people do garner are worth more than in the past.
Indeed, during the last three years, wage gains after inflation have been the best in more than two decades, according to government statistics.
"We are . . . seeing some very impressive real wage growth, which is a big change over what was happening earlier in the 1990s," said Alan B. Krueger, a Princeton University labor economist.
