| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Quarter over Quarter | 1.1% | 1.0% to 1.3% | 1.0% | 1.2% |
| Year over Year | 4.5% | 4.8% |
Highlights
Compensation costs slowed in the second quarter adding to building evidence that inflation pressures in general, though still very high, are indeed cooling at a significant pace. The employment cost index rose 1.0 percent in the second quarter compared to the first quarter, down from 1.2 percent in the first quarter and just below Econoday's consensus. This is the lowest rate since the fourth quarter of 2021. Year-over-year the ECI slowed to 4.5 percent from 4.8 percent in the first quarter and a 5.1 percent peak in the fourth quarter.
Wages & salaries as well as benefits both slowed, from 1.2 to 1.0 percent on the quarter for the former and from 1.2 to 0.9 percent for benefits. Year-over-year rates cooled from 5.0 to 4.6 percent for wages & salaries and from 4.5 to 4.2 percent for benefits.
This report has maximum impact on Federal Reserve policy, and the favorable direction increases the chances that monetary tightening has already reached its greatest pitch.
Wages & salaries as well as benefits both slowed, from 1.2 to 1.0 percent on the quarter for the former and from 1.2 to 0.9 percent for benefits. Year-over-year rates cooled from 5.0 to 4.6 percent for wages & salaries and from 4.5 to 4.2 percent for benefits.
This report has maximum impact on Federal Reserve policy, and the favorable direction increases the chances that monetary tightening has already reached its greatest pitch.
Market Consensus Before Announcement
After the first quarter's 1.2 percent rise, forecasters see employment costs rising 1.1 percent in the second quarter in what would be another overheated result.
Definition
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.
Description
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.
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.
