US Employment Cost Index Rises 0.8% in Q3, in Line With Expectations
Key Takeaways
- •The third-quarter Employment Cost Index rose 0.8% from the previous quarter, in line with the consensus forecast.
- •Quarterly wage growth slowed to 0.7%, while benefit costs increased 0.9%.
- •Civilian compensation costs rose 3.4% year over year, with benefits growing faster than wages.
- •Private-sector inflation-adjusted wages declined 0.6% over the year as nominal pay growth lagged consumer prices.
- •The fourth-quarter ECI will indicate whether the recent moderation in labor-cost growth continues.
The US Employment Cost Index (ECI) rose 0.8% quarter over quarter in the third quarter, matching the +0.8% consensus expectation and moderating from the +0.9% increase recorded in the prior quarter, according to the latest release from the Bureau of Labor Statistics (BLS).
The quarterly breakdown showed:
- Employment benefits: +0.9%, versus +1.0% in the prior quarter
- Employment wages: +0.7%, versus +0.9% in the prior quarter
Both wages and salaries and benefit costs contributed to the increase. Wages and salaries rose 0.7%, while benefit costs advanced 0.9% compared with the previous quarter.
On an annual basis, total compensation costs for civilian workers increased 3.4%, with wages and salaries rising 3.1% and benefit costs accelerating 3.9%. The figures indicate that labour cost pressures remain relatively contained, although benefits continue to rise faster than wages. That containment matters beyond the labor market: labor costs are a core component of underlying inflation, so the moderation is a relevant data point for anyone tracking whether price pressures are easing.
In the private industry, compensation costs likewise increased 0.8% quarter over quarter and 3.4% year over year. However, inflation-adjusted wages and salaries declined 0.6% over the year, as nominal wage growth continued to lag behind consumer price increases. The persistent gap between nominal and inflation-adjusted wage growth highlights the pressure households are facing from higher living costs.
For background, the ECI is a quarterly report from the BLS that measures the change in the total cost of labor for businesses, covering both wages, salaries, and benefit costs. It is constructed to be unaffected by shifts in the composition of employment across occupations and industries, which is one reason the Federal Reserve considers it the "gold standard" for measuring wage inflation, as it is more precise and comprehensive than other labor cost measures. Its main drawback is that it is less timely than Average Hourly Earnings data. The fourth-quarter update will show whether the moderation continues; in the meantime, monthly Average Hourly Earnings releases offer a more frequent, if less comprehensive, read on wage trends.
Source: ForexLive — US employment cost index for Q3 +0.8% vs +0.8% expected
