Rising labor costs an inflation concern


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NEW YORK, May 5 (UPI) -- U.S. labor costs have gone up faster than expected this year providing another major inflation warning, it was reported Thursday.

Although energy costs get more public attention, labor costs are a greater concern for the Federal Reserve since it makes up a much larger proportion of the price of goods and services, the Financial Times said.

Labor costs, which had been falling for most of 2003, have risen by 2.2 percent this year, up from an annualized 1.7 percent in the final three months of 2004.

"The Federal Reserve may be starting to feel slightly uncomfortable with labor costs rising at this rate," said Paul Ashworth, U.S. analyst at Capital Economics.

Whether rising unit labor costs feed through to higher prices for consumers will depend partly on the willingness of companies to absorb the extra costs by trimming their profit margins, the Times said.

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