WASHINGTON (Reuters) – U.S. labor costs increased in the second quarter as employers boosted benefits for workers, leading to the largest annual increase since 2008.

The Employment Cost Index, the broadest measure of labor costs, rose 0.6 percent after an unrevised 0.8 percent advance in the first quarter, the Labor Department said on Tuesday.

Labor costs increased 2.8 percent year-on-year, the biggest annual gain since September 2008 and followed a 2.7 percent advance in the first quarter.

Economists polled by Reuters had forecast the ECI rising 0.7 percent in the April-June quarter.

Wages and salaries, which account for 70 percent of employment costs, rose 0.5 percent in the second quarter. They increased 0.9 percent in the first three months of the year.

Wages and salaries were up 2.8 percent in the 12 months through June, also the biggest annual gain since September 2008. Economists expect a significant acceleration in wage growth in the second half of the year, boosted by a tightening labor market. The labor market is considered to be near or at full employment, with a 4 percent jobless rate.

The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack. It is also considered a better predictor of core inflation. Economists say labor costs need to rise by at least 3 percent to lift inflation to the U.S. central bank’s 2 percent inflation target.

Private sector wages and salaries rose 0.6 percent in the second quarter. They were up 2.9 percent in the 12 months through June after a similar gain in the year to March.

Benefits for all workers increased 0.9 percent in the April-June quarter, the biggest gain in four years, after rising 0.7 percent in the first quarter. They were up 2.9 percent in the 12 months through June, the largest increase December 2011, after rising 2.6 percent in the year to March.