On Friday, economists got a fresh read on the U.S. recovery: The federal government reported fourth-quarter gross domestic product growth slowed to 2.6% from the third-quarter’s 5%.
The good news is few economists expected to outstrip the third-quarter’s robust number. The bad news is slower GDP growth wasn’t the only disappointment. In fact, many experts were looking past that headline number at something else: the Employment Cost Index.
The Labor Department index, a measure of overall employment costs, including wages but also benefits like health care, rose 2.2% year over year for the fourth quarter. It had grown 2.3% in the fourth quarter, and economists had been hoping to see it meet or exceed that mark.
That it failed to do so suggests wage growth — largely seen as the last missing piece of the recovery — still hasn’t picked up as much as we would all like. The upshot is, while Americans seem to be able to find work, solid middle class jobs still appear to be scarce. Sluggish wage growth also means the Federal Reserve, which is feeling pressure to raise interest rates, may have extra breathing room, since rising wages a key driver of inflation.