US labor costs growth slows in third quarter

WASHINGTON, Dec 10 (Reuters) - U.S. labor costs increased slightly less than expected in the third quarter as a softening labor market curbed wage growth, which bodes well for services inflation.

The Employment Cost Index (ECI), the broadest measure of labor costs, rose 0.8% in the last quarter, after gaining 0.9% in the second quarter, the Labor Department's Bureau of Labor Statistics said on Wednesday. Economists polled by Reuters had forecast the ECI advancing 0.9%.

Labor costs increased 3.5% in the 12 months through September after rising 3.6% in the year through June.

The report was delayed by the 43-day government shutdown, which ended last month.

The ECI is viewed by policymakers as one of the better measures of labor market slack and a predictor of core inflation because it adjusts for composition and job-quality changes.

While the moderation suggested wages posed no threat to inflation, price pressures remain elevated because of tariffs on imports. Cooler wage growth could also hamper consumer spending.

Federal Reserve officials are expected to cut the U.S. central bank's benchmark overnight interest rate by another 25 basis points to the 3.50%-3.75% range at the end of a two-day meeting later on Wednesday out of concern for the labor market.

The Fed has lowered borrowing costs twice this year.

Wages and salaries, which account for the bulk of labor costs, rose 0.8% last quarter after increasing 1.0% in the April-June quarter. They increased 3.5% on an annual basis. When adjusted for inflation, overall wages rose 0.6% in the 12 months through September after advancing 0.9% in the second quarter.