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US employment compensation up 0.3 percent in Q1; wages grow faster, but benefits slow

Americans' wages increased at a faster rate from January through March than the previous quarter, a trend that helped boost consumer spending at the start of the year. But their benefits barely grew.

The Labor Department said Tuesday that an index that measures wages and benefits rose 0.3 percent during the first quarter. That's down from a 0.4 percent gain in the October-December quarter and the smallest gain in a year.

Wages and salaries rose 0.5 percent, up from the 0.3 percent gain in the previous quarter. But benefits, which include health insurance and pension contributions, rose just 0.1 percent after a 0.6 percent rise in the fourth quarter.

Higher pay has helped consumers shake off an increase in Social Security taxes. Consumer spending rose in the first quarter at the fastest pace in more than two years.

But economists said wages must grow even faster to sustain the first-quarter gains in consumer spending.

For the 12 months ending in March, wages and salaries are up just 1.6 percent, slightly lower than the 1.7 percent rise in the 12 months ending in December. That means that wages have barely kept up with inflation.

"We are seeing very weak wage growth," said Gregory Daco, a senior U.S. economist at Global Insight.

Wages account for about 70 percent of compensation costs. Benefits account for the other 30 percent.

The Labor Department said that it had discovered an error in the benefits data for a private industry sales and office staff covering the current report and the two previous reports. Labor Department analysts said the error should make only a small difference in the overall benefits number.

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