U.S. Dollar Under Pressure After U.S. Labor Costs Rise At Weakest Pace Since 1982

graphThe U.S. dollar is falling on Friday against the euro following the release of the Employment Cost Index, the primary measurement of labor costs, which rose only 0.2 percent in the 2nd quarter of 2015, representing the weakest increase since 1982.

Economists from briefing.com were forecasting an increase of 0.7 percent.

Wages and salaries increased 2.1 percent over the current 12-month period.

In June 2014 the change was 1.8 percent.

Benefit costs rose 1.8 percent over the 12-month period ending June 2015. In June 2014 the increase was 2.5 percent.

The Employment Cost Index is an indicator that points to labor slack in the economy and is used as a predictor of core inflation.

Committee members in the Federal Reserve pay attention to the Employment Cost Index when deciding about monetary policy and changes with interest rates.

According to the Bureau of Economic Analysis, the trimmed mean PCE rate in May, excluding food and energy, was 1.6 percent.

On a 12 month basis, PCE inflation, excluding food and energy, rose 1.2 percent.

The Federal Reserve wants to see the evidence of rising inflation that moves closer to its 2 percent inflation target in the medium term before raising interest rates with the federal funds rate.

Yesterday the Commerce Department released GDP results for the 2nd quarter of 2015 which revealed that economic growth expanded by 2.3 percent in the 2nd quarter (the second 3 month period of 2015 ending in June).

Economists from briefing.com were forecasting 1.3 economic growth in the 2nd  quarter.

The Commerce Department also showed revised first quarter GDP results from -0.2 percent to 0.6 percent.

-Johnathan Schweitzer


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