Wages in the US increase 1.2% in the first quarter of 2023: what it means for the Fed

The wages of workers in the United States increased by 1.2% during the first three months of the year, according to the Employment Cost Index, published this Friday by the Bureau of Labor Statistics (BLS).

The BLS report showed that worker wages and business costs continue to give reasons for the Federal Reserve (Fed) to maintain its rate hike strategy.

The report on the rise in workers' wages comes at the right time for the Fed as it prepares for its May meeting, in which it will decide whether to raise its key interest rate again.

The 1.2% increase in wages and benefits for workers was also above the expectations of analysts, who expected an increase of 1.1% .

In annual terms, workers' wages increased by 5.1% compared to March of last year, confirming that companies in the United States have faced higher labor costs.

“The Fed needs a fairly substantial increase in unemployment to reduce overall aggregate demand, which would then lead to layoffs, less competition for labor, and lower wages,” Thomas Simons, a senior economist at Jefferies, said in a report for CNN Business.

Last March, inflation stood at 5.0% in its annual comparison, which marked the ninth consecutive month of setbacks; However, for policymakers, the labor market could be hot enough to keep raising rates.