The employment cost index is up 1.0 percent quarter-over-quarter for the fourth quarter 2022. The reading is slightly below the consensus of up 1.1 percent in an Econoday survey. The increase reflects a 1.0 percent rise in wages and salaries and a 0.8 percent rise for benefits costs. The increase in total compensation is the lowest since 1.0 percent in the fourth quarter 2021.

Compensation for goods-producers is up 0.9 percent, the same as the prior quarter and pointing to some easing in that sector's competition for skilled workers. Compensation for service providers is up 1.0 percent quarter-over-quarter, the slowest since 0.9 percent in the fourth quarter 2021.

Compared to the fourth quarter 2021, total compensation is up 5.1 percent year-over-year. This is quite similar to the trend in the prior three quarters. Wages and salaries are up 5.1 percent year-over-year in the fourth quarter, the same as the prior two quarters. Benefits costs are up 4.9 percent in the fourth quarter compared to the fourth quarter 2021, and are on trend with recent quarters.

Generally, the employment cost index shows no escalation in upward pressures for employee compensation. This is a solid indication that the pace of quarter gains are decelerating, which in turn should mean that the year-over-year rises will be less as well. However, compensation costs continue to rise more than has been seen since the start of the series in 2001

Enormously swollen gains of 1 percent and more over the last five quarters have been signaling substantial wage-push pressures. A sixth 1 percent or more, at 1.1 percent, is expected for the fourth quarter.

A measure of total employee compensation costs: 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.