US: Employment Cost Index

Fri Apr 28 07:30:00 CDT 2017

Consensus Consensus Range Previous
ECI - Q/Q change 0.6% 0.5% to 0.8% 0.5%

Market Consensus Before Announcement
Benefit costs have been slowing as has the employment cost index which posted a moderate 0.5 percent quarterly gain and a year-on-year increase of only 2.2 percent, fourth-quarter results consistent with lack of wage traction in the labor market. Forecasters are calling for slightly more strength in the first quarter with the Econoday consensus at 0.6 percent.

A measure of total employee compensation costs, including wages and salaries as well as benefits. The employment cost index (ECI) is the broadest measure of labor costs.

The employment cost index is an easy way to evaluate wage trends and the risk of wage inflation. Wage inflation is high on the Federal Reserve's enemy list. Fed officials are always on the lookout for the prospects of inflationary pressures. Wage pressures tend to percolate when economic activity is booming and the demand for labor is rising rapidly. During economic downturns, wage pressures tend to be subdued because labor demand is down.

By tracking labor costs, investors can gain a sense of whether businesses will feel the need to raise prices. If wage inflation threatens, it's a good bet that interest rates will rise, bond and stock prices will fall, and the only investors in a good mood will be the ones who tracked the employment cost index and adjusted their portfolios to anticipate these events.