By Gabriel T. Rubin

Worker pay and benefit gains remained elevated at the end of last year but showed modest signs of cooling as Federal Reserve officials meet to consider further interest rate increases.

Employers spent 5.1% more on wages and benefits in the fourth quarter of 2022 compared with the previous year, up slightly from a 5.0% annual gain in the third quarter, the Labor Department said Tuesday. Growth eased somewhat from the prior quarter, advancing 1%, versus a 1.2% increase in the third quarter.

The Fed has aggressively raised rates in the past year with the aim of cooling the economy to combat inflation. Central bank officials are starting a two-day meeting Tuesday, and have said they were closely watching Tuesday's data.

Compensation growth is an important factor in the inflation puzzle because it both represents a cost employers factor in when setting prices and reflects workers' ability to pay for more expensive goods and services.

Average hourly earnings for private-sector employers rose 4.6% in December from a year earlier, according to the Labor Department's latest jobs report. That was down from a recent high annual gain of 5.6% in March 2022. Consumer prices advanced 6.5% in December from a year earlier.

Write to Gabriel T. Rubin at gabriel.rubin@wsj.com

(END) Dow Jones Newswires

January 31, 2023 09:03 ET (14:03 GMT)