Jan 29, 2016 3 min read

WASHINGTON – U.S. paychecks increased moderately in the final three months of last year, yet the gain was little changed from the sluggish post-recession trend.

The employment cost index, which tracks wages and benefits, rose 0.6 percent in the October-December quarter, the Labor Department said. That was the same as the previous three months.

In the past year, salaries and benefits rose just 2 percent, the same annual pace as the previous two quarters. That is below the roughly 3.5 percent rate that is consistent with a healthy economy.

There were some signs wages are picking up in other data, but those gains are modest. Average hourly pay increased 2.5 percent in December from a year earlier, according to the government’s monthly jobs report.

That was only the second time since 2009 increases reached that level, but it’s not far from the sluggish 2 percent pace that existed since the recession.

Still, the modest annual gain in the employment cost index suggests companies are able to find the workers they need without offering much higher pay. That suggests there still may be millions of Americans who are unemployed or underemployed, but are not reflected in the official unemployment rate.

For example, the number of people with part-time jobs, but who would prefer full-time work, remains higher than pre-recession levels.

“In short, largely a continuation of recent tame trends,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics, said in an email. “Unemployment is just approaching standard estimates of the full employment level now and still appears to be trending down, and wages tend to lag.”

Americans are seeing some improvement in inflation-adjusted wages. The Fed’s preferred inflation gauge rose just 0.3 percent in 2015, held down by sharp drops in gas and other energy prices. That’s lower than the 1.4 percent gain recorded in 2014 and means U.S. paychecks were able to stretch a bit further last year.

The modest wage increase suggests inflation will likely remain tame in the coming months. Higher labor costs would force companies to raise prices. The Federal Reserve predicted Wednesday inflation would stay low in the short term.

It was stuck below Fed policymakers’ 2 percent target for more than three years, which could complicate their plans to boost interest rates. The Fed raised its short-term benchmark rate in December after keeping it pinned at nearly zero for seven years.

Yet since then, oil prices plummeted and inflation is further from the Fed’s goal.

Employers added 2.7 million jobs in 2015, and the unemployment rate fell from 5.6 percent at the end of 2014 to 5 percent in December.

As the unemployment rate declines and gets closer to levels consistent with a strong economy, employers typically are forced to raise pay to attract and keep workers. But so far, that trend doesn’t appear to have kicked in yet.