US Q2 Employment Cost Index Rises 0.9%, Topping Expectations of 0.8%

Date: 31 July 2026

The U.S. Employment Cost Index (ECI) increased 0.9% in the second quarter of 2026, coming in above market expectations of 0.8%. The prior quarter's reading was also +0.9%. The ECI, published quarterly by the Bureau of Labor Statistics, is closely watched by the Federal Reserve as one of its preferred gauges of labor cost inflation, since it accounts for compositional changes in the workforce that other wage measures may miss.

Quarterly Breakdown

For all civilian workers, total compensation rose 0.9% in the three months through June. Wages and salaries advanced 0.9%, while benefit costs increased 1.0%. The previous quarter's figures showed wages at +0.8% and benefits at +1.2%.

Year-over-Year Trends

On an annual basis, compensation climbed 3.4%, with wages and salaries up 3.2% and benefits rising 3.8%. Benefits costs have consistently outpaced wage growth on a 12-month basis, reflecting ongoing pressures in employer-sponsored health insurance and retirement contributions.

Private Sector Detail

Private-sector compensation also gained 0.9% during the quarter, with both wages and salaries and benefit costs rising 0.9%. Compared with a year earlier, private-sector compensation increased 3.3%, driven by a 3.1% rise in wages and salaries and a 3.8% gain in benefits.

Real Wages Decline

Despite continued nominal wage growth, inflation-adjusted wages and salaries for private-industry workers fell 0.4% over the year, indicating that consumer price increases modestly outpaced wage gains. This marks a continuation of the pattern seen in recent quarters, where headline wage growth has remained positive in nominal terms but has not fully kept pace with the cost of living. The next ECI release, covering the third quarter, will provide an updated read on whether labor cost pressures are stabilizing or accelerating further.