Employment Costs Rose 2.9% Last Year

Workers’ wages and benefits rose a moderate 2.9 percent last year, the government reported Tuesday, triggering a temporary rally in financial markets.

Bonds shot up initially after the labor cost report, boosting stocks despite a separate, worrisome report on consumer confidence. Both, however, gave up their gains at the close.

Analysts were divided over what impact the seemingly conflicting reports would have on interest rates.

Also Tuesday, the Conference Board, a business research group, reported that its consumer confidence index jumped in January to a 7-1/2-year high. Some analysts suggested the steep advance could lead to sharply increased consumer spending, which represents two-thirds of the nation’s economic activity. That, together with rising labor costs, could lead to higher prices, they argued.

The 2.9 percent increase in labor costs last year was the biggest since they rose 3 percent in 1994. Labor costs had risen 2.7 percent in 1995.