WASHINGTON (NEWSnet/AP) — Pay and benefits for U.S. workers grew in the final three months of last year at the slowest pace in 30 months.

Compensation as measured by the government's Employment Cost Index rose 0.9% in the October-December quarter, down from a 1.1% increase in the previous quarter, U.S. Department of Labor said Wednesday. Compared with the same quarter a year earlier, compensation growth slowed to 4.2% from 4.3%.

The increase in wages and benefits still was mostly healthy, but the slowdown could contribute to the cooling of inflation and likely will be welcomed by Federal Reserve policymakers. The Fed is expected to keep its key short-term rate unchanged.

The pace of worker compensation plays a major role in businesses’ labor costs. When pay accelerates remarkably fast, it increases the labor costs of companies, which often respond by raising prices. This cycle can perpetuate inflation.

Since the pandemic, wages on average have grown at a historically rapid pace, before adjusting for inflation. Many companies have had to offer much higher pay to attract and keep workers. Yet hiring has moderated in recent months to levels closer to the pre-pandemic rate.

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