US wages trail price growth for two consecutive quarters as inflation continues to squeeze consumers.

US labor cost growth trailed inflation for a second consecutive quarter, the latest sign that rising prices are squeezing American household budgets. Data released Friday by the US Bureau of Labor Statistics (BLS) showed that the Employment Cost Index (ECI), which measures changes in wages and benefits, fell 0.4% over the 12 months through September after adjusting for inflation. Before accounting for price changes, the index rose 3.4%. On a quarterly basis, the gauge rose 0.8%. The US labor market has been broadly stable this year, with few layoffs and weak hiring. But many workers are struggling to keep pace with rising prices. "Job growth has kept pace with the size of the labor force, and the unemployment rate has changed little. But inflation remains high," Federal Reserve Chair Kevin Warsh said Wednesday after the central bank decided to hold interest rates steady. Friday's ECI report showed that wage and salary growth for private workers edged down to 0.7% in the three months through September, and was up 3.1% year-on-year, the lowest since 2021. After adjusting for inflation, wages fell 0.6% over the 12 months through September. Wage growth slowed broadly across multiple industries, including construction and leisure and hospitality. Annual wage growth across the broader services sector fell to the lowest since 2016. Healthcare benefit costs for private-sector employers rose to 6.4% in the year through September, matching the highest level since 2005. PCE data released Thursday showed that US personal income rose by US$54.5 billion in September, up 0.2% month-on-month (market expectation 0.3%), while disposable personal income rose by US$52.7 billion, up 0.2%, but real disposable income fell 0.3%; personal consumption expenditures rose by US$113.1 billion, a nominal increase of 0.5% (market expectation 0.6%), while real spending rose by only US$2.6 billion, an increase of less than 0.1%, essentially zero; personal saving was US$911.1 billion, and the saving rate fell to 3.8%. Previously released September retail sales came in above expectations, which is also easy to read as "consumption remains strong." But breaking down the structure, the conclusion is much more cautious. First, the 0.8% increase was highly dependent on the single category of gas stations. Excluding that, only 0.2% remained; excluding autos, building materials and food services as well, only 0.1% remained. Retail data is seasonally adjusted but not inflation-adjusted, and if September's 0.6% monthly price increase is factored in, real retail sales were "flatter than flat." And the pressure is still mounting. The US average gasoline price remains above US$4 per gallon, and gasoline and other energy commodity prices rose 9.2% month-on-month in September (4.4% in August), with energy spending rising in six of the first nine months of this year. Observations from companies also point to divergence: UPS CEO Carol Tom said on the company's earnings call this week that as long as the employment rate remains stable, "consumers will spend because they have assets," but she also stressed that people without assets are already struggling; Coca-Cola said households across income levels are prioritizing "value." Next week, the BLS will release the October nonfarm payrolls report, providing the latest look at US hiring and wages.