WASHINGTON, July 31 (Reuters) – U.S. labor costs recorded their largest increase in more than 5-1/2 years in the second quarter, a sign that a long-awaited acceleration in wage growth was imminent.

The Employment Cost Index, the broadest measure of labor costs, rose 0.7 percent after increasing 0.3 percent in the first quarter, the Labor Department said on Thursday. That was the largest gain since the third quarter of 2008.

Economists polled by Reuters had forecast the employment cost index increasing 0.5 percent in the second quarter.

It is one of Federal Reserve Chair Janet Yellen’s favorite labor market gauges and is being closely watched for clues on the timing of the first interest rate increase from the U.S. central bank.

Growing anecdotal evidence of companies raising wages has left economists expecting the employment cost index to start rising significantly sometime in the second half of 2014.

In the 12 months through June, labor costs rose 2.0 percent. They had advanced 1.8 percent in the 12 months through March.

Wages and salaries, which account for 70 percent of employment costs, increased 0.6 percent in the second quarter. That was the largest gain since the third quarter of 2008 and followed a 0.3 percent rise in the first quarter.

Wages and salaries were up 1.8 percent in the 12 months through June after rising 1.6 percent in the 12 months through March. Benefit costs jumped 1.0 percent in the April-June period, the largest increase since the second quarter of 2011, likely reflecting expanded health insurance coverage.

Benefits had gained 0.4 percent in the first quarter. They increased 2.5 percent in the 12 months through June after rising 2.1 percent in the 12 months through March. (Reporting By Lucia Mutikani; Editing by Andrea Ricci)

http://www.reuters.com/article/2014/07/31/us-economy-costs-idUSLNSVIEAJ220140731