(Bloomberg) -- U.S. employment costs climbed less than forecast inthe fourth quarter, reflecting steady wage growth and the smallestadvance in benefits in more than a year.

The 0.5 percent advance in the employment cost index followed a0.6 percent gain in the previous three months, a Labor Departmentreport showed Tuesday. Wages and salaries increased 0.5 percent fora second straight quarter, while benefits costs eased to 0.4percent, the slowest pace since the second quarter of 2015.

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Businesses are competing to attract or retain staff as thelabor market faces a shortage of qualifiedworkers and layoffs remain low. A sustained pickup in Americans’paychecks could boost consumer spending, in addition to helpingpush inflation closer to the Federal Reserve’s goal.

The median forecast in a Bloomberg survey for the ECI called fora 0.6 percent increase, with estimates ranging from 0.5 percent to0.8 percent. The gauge measures employer-paid taxes such as SocialSecurity and Medicare in addition to the costs of wages andbenefits.

The ECI rose 2.2 percent from a year earlier, compared with a2.3 percent gain in the previous three months.

Benefit costs for all workers, which include some bonuses,severance pay, health insurance and paid vacations, rose 0.7percent in the third quarter. Compared with the fourth quarter of2015, they were up 2.1 percent.

Wages and salaries were up 2.3 percent over the 12 months,compared with a 2.4 percent year-over-year gain in the thirdquarter.

Wages and salaries typically account for about 70 percent oftotal employment expenses. The ECI data may help shed more light onthe outlook for worker pay.

Because the ECI tracks the same job over time, it removes shiftsin the mix of workers across industries, which is a shortcoming ofthe hourly earnings figures that are provided in the government’smonthly employment report.

Private wages rose 0.5 percent from the previous three monthsand were up 2.3 percent from the same period a year earlier. Wagesof government employees also rose 0.5 percent in the fourth quarterand advanced 2.1 percent from a year earlier.

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