U.S. employment costs rise 0.9% in Q2 2026, above forecasts
The Employment Cost Index matched the prior quarter and beat a 0.8% forecast, with annual compensation growth holding at 3.4% as private-sector wage gains picked up and jobless claims stayed low.
U.S. labor costs rose 0.9% in the second quarter of 2026, matching the prior quarter and exceeding economists' forecasts for a 0.8% increase. The Employment Cost Index, a closely watched measure of compensation pressures, was up 3.4% from a year earlier, unchanged from the annual pace in the first quarter. Wages and salaries, which make up the largest share of labor costs, increased 0.9% in the quarter and 3.2% from a year earlier, while private-sector wages and salaries accelerated to a 0.9% quarterly gain from 0.7% in the January-March period. The data underscored persistent labor-cost pressure for businesses even as economists describe the job market as stuck in a "low hiring, low firing" state and hiring momentum weakened in June after stronger gains between March and May. Initial jobless claims for the week ended July 25 rose by 9,000 to 197,000, below a 200,000 market forecast, while continuing claims fell by 7,000 to 1.782 million, reinforcing the view that the labor market remains resilient. The Employment Cost Index is one of the indicators the Federal Reserve monitors for signs that wage growth could keep service-sector inflation elevated and complicate the path back to its 2% inflation target.
- Employment Cost Index: A U.S. measure of labor costs that tracks wages, salaries and benefits across jobs and industries.
- continuing claims: The number of people who remain on unemployment benefits after filing an initial claim.
- service-sector inflation: Price increases in services, which can be influenced by labor costs because wages are a major expense for many service businesses.