U.S. labor costs rise highest in two decades amid accelerating inflation

• Average hourly wages rose 4.7% in December from a year earlier

• Inflation rose 4.9% in December 2021 compared to the last year

U.S. labor costs rose 4%—highest increase since 2001—as employers spent more on wages and benefits last year amid tight labor market and accelerating inflation.

The Labor Department said on Friday the U.S. employment-cost index—quarterly measure of wages and benefits paid by employees—rose the highest in the fourth-quarter in two decades.

Inflation rose 4.9% in December 2021 compared to the last year, while household spending fell 0.6% last month, the Commerce Department said.

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Average hourly wages rose 4.7% in December from a year earlier, but is not enough compared with the rising inflation, which is the fastest pace in nearly four decades.

Rising wages

JPMorgan Chase & Co (NYSE: JPM) said earlier this month that its expenses would rise 8% in 2022, partially due to labor costs.

McDonald’s Corp. (NYSE: MCD) also increased wages more than 10% at U.S. restaurants due to which it raised menu prices. The fast-food chain said that U.S. menu prices increased about 6% last year due to increase in labor, food and packaging costs.

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The airlines industry was also impacted by rising labor costs as manufacturers and suppliers saw labor costs climb 7% in the third quarter.

Picture Credits: Getty Images