American workers’ wages and benefits rose in the third quarter by the smallest amount in more than three years, indicating that labor costs continue to cool and pose less of an inflationary threat.

It was the second consecutive quarter in which the index rose less than 1.0%. The last time it happened was in 2020.

The Federal Reserve considers the ICE to be the most accurate measure of labor costs and takes the report into account when raising or lowering interest rates.

The rate of workers’ compensation growth slowed to 3.9% in the third quarter from 4.1% in the second quarter and a post-pandemic peak of 5.3% in 2022. It is the smallest increase in three years.

Workers are no longer changing jobs as much to try to earn higher wages, as hiring has slowed and new jobs are not as easy to find. Companies are also holding firm on wage increases to try to contain their own costs.

Federal Reserve Chair Jerome Powell doesn’t think labor costs are adding upward pressure to inflation, but the central bank wants wages to cool further.

Total compensation continues to increase noticeably faster than the 2.8% average from 2017 to 2019.

Wages and salaries increased by 0.8% in the third quarter. They represent 70% of the labor cost index.

Profits also rose 0.8%.