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Labor cost increase hits the highest level in 20 years amid worker shortage in economy

Labor costs increase by most in 20 years

U.S. labor costs rose by the most since 2001 as companies boosted wages and benefits amid a severe domestic worker shortage, suggesting inflation could remain high for some time. The Employment Cost Index (ECI), the broadest measure of labor costs, surged 1.3 percent last quarter after rising 0.7 percent from April to June, the Labor Department said Friday. The gain reflected an increase across industries in the economy.

Labor costs powered ahead 3.7 percent, the largest rise since the fourth quarter of 2004, after increasing 2.9 percent in the second quarter. The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack and a predictor of core inflation, adjusting for composition and job quality changes. Economists polled by Reuters had forecast the ECI advancing 0.9 percent in the third quarter.

Wages and salaries soared 1.5 percent after increasing 0.9 percent from April to June. They were up 4.2 percent year-over-year. Benefits gained 0.9 percent after rising 0.4 percent from April to June. The pandemic has upended labor markets, creating a worker shortage across the economy. There were 10.4 million job openings at the end of August.

The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index that excludes food and energy changes, rose at a 4.5 percent rate in the third quarter after increasing at a 6.1 percent pace in the second quarter, the government reported Thursday. The U.S. central bank has a flexible 2 percent inflation target set in place.

— Reuters

Toyota boosts investment in United States

Toyota is investing $461 million in its first American plant to add on new technology, increase production flexibility and reduce its carbon footprint, the company said on Friday in a statement.

The announcement didn’t include new jobs at the central Kentucky facility, but officials said 1,400 temporary jobs would be converted into permanent positions in an effort to improve recruiting, retain top talent and provide a more inclusive work environment.

The company plans include upgrading the Georgetown plant with advanced equipment and technologies to increase speed and competitiveness, Toyota stated. Those plans include improvements to expand the plant’s ability to manufacture new electric products. The company also plans to add a 2.4-liter turbo engine line, which will support expanding the range of vehicle models produced in North America.

The plant will still build the Camry, Camry Hybrid and RAV4 Hybrid, but production of the Lexus ES and Lexus ES Hybrid will shift back to Japan in 2024. The plant began its transformation back in 2017 with a $1.3 billion investment to equip the facility with the Toyota New Global Architecture platform and a new paint operation.

— Associated Press

Also in business

Exxon Mobil and Chevron are plowing the windfall profits into share buybacks as soaring energy prices increase cash flows. Exxon will revive repurchases for the first time since 2016, spending as much as $10 billion from next year in a move that surprised analysts. Chevron is considering an expansion of its buyback program after surging natural gas prices and oil-refining returns drove free cash flow to an all-time high in the last quarter. Shares of both companies climbed. The oil giants are using windfall profits to reward shareholders rather than ramp up spending on new drilling as was done during previous market booms.

Regional pharmacy chain operator Giant Eagle said on Friday it had agreed to settle lawsuits accusing it of fueling the opioid epidemic across several Ohio communities, including two counties that had taken it and three larger rivals to trial. The settlement came during the fourth week of a trial in federal court in Cleveland over claims by the Ohio counties of Lake and Trumbull against Giant Eagle, Walgreens Boots Alliance, CVS Health and Walmart. The settlement resolves claims made against Giant Eagle in 10 lawsuits by those counties and others in Ohio, the company and lawyers for the plaintiffs said in a joint statement. It operates grocery stores and pharmacies in five states including Ohio.

Royal Caribbean Group missed market estimates for quarterly revenue on Friday, as people were apprehensive about going on cruises due to the delta variant. Cruise ships have been sailing from U.S. ports again since late June with mostly vaccinated guests and crew, but some onboard cases and a spike in infections have raised worries about the industry in the near term. Regular testing has helped cruise lines ensure isolated cases of the coronavirus do not become a full-blown outbreak, even as the response to resumption of U.S. cruising has been mixed.

— From news services