U.S. employment costs rose as expected in the second quarter, but at a slower rate than at the start of the year, as benefit costs growth slowed and wages remained subdued, a government report showed on Thursday.

The Employment Cost Index (search), a broad gauge of what employers pay in wages and benefits, climbed 0.9 percent in the second quarter after a rise of 1.1 percent in the first three months of the year, the Labor Department (search) said.

The increase matched expectations on Wall Street.

Wages and salaries rose a slim 0.6 percent for the second quarter in a row. Over the past 12 months, wages are up just 2.5 percent, matching the period through March as the smallest 12-month gain on records dating to 1982.

Sluggish wage growth has become a central issue in the presidential campaign.

Democrat John Kerry has argued that many Americans are being "squeezed" as tepid wage gains fail to keep pace with a rising cost of living. President Bush counters that sizable tax cuts have given a big boost to the disposable income of Americans, providing a solid underpinning for the economy's expansion.

Benefit costs advanced 1.8 percent over the last three months. The increase accounted for over half of the overall rise in compensation costs.

Nevertheless, the gain marked a slowdown from the first quarter when benefit costs spiked 2.4 percent, the biggest leap in more than 20 years, as company contributions to defined benefit pension plans rose sharply.