TREASURIES-Yields fall as U.S. wage data reinforces low inflation fears

(Adds North Korea missile tests, bond outlook; updates prices)

* Labor cost growth slows in second quarter

* U.S. economic growth accelerates in second quarter

* North Korea missile test sparks bond safety buying

NEW YORK, July 28 (Reuters) - U.S. Treasury yields fell on Friday after data showed that U.S. labor costs rose less than expected in the second quarter, adding to concerns that inflation will remain low. The Employment Cost Index, the broadest measure of labor costs, increased 0.5. percent in the April-June period after accelerating 0.8 percent in the first quarter, the Labor Department said on Friday. The news came after the Federal Reserve on Wednesday noted that both overall inflation and a measure of underlying price gains had declined and said it would "carefully monitor" price trends. "I think the market is focused on the employment cost index. You're getting further confirmation that there's not a meaningful pick up in wages, which probably doesn't bode well for the outlook for inflation," said Subadra Rajappa, head of U.S. interest rate strategy at Societe Generale in New York. Bonds extended price gains on reports that North Korea fired a missile on Friday in an unusual late-night test launch. Details announced by officials in Japan, South Korea and the United States suggested it was an intercontinental ballistic missile (ICBM).

Benchmark 10-year notes rose 5/32 in price to

yield 2.29 percent, down from 2.31 percent on Thursday. Other data showed on Friday that U.S. economic growth accelerated in the second quarter as consumers ramped up spending and businesses invested more on equipment, confirming that the sluggish performance early in the year was temporary.

Next week's economic focus will be on Friday's employment report for July. The Treasury Department's quarterly refunding announcement on Wednesday will also be scrutinized for any indication of how the government plans to make up for a reduction in Federal Reserve bond purchases, when the U.S. central bank begins paring them. The Fed said on Wednesday it expected to start winding down its massive holdings of bonds "relatively soon." Many analysts and traders expect the Fed to announce its balance sheet reduction plans at its September meeting.

(Reporting by Karen Brettell; Editing by Richard Chang)