| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Quarter over Quarter | 1.0% | 0.8% to 1.0% | 1.1% | 1.0% |
| Year over Year | 4.3% | 4.5% |
Highlights
The employment cost index for total compensation is up 1.1 percent quarter-over-quarter in the third quarter after rising 1.0 percent in the second quarter. The increase is in line with the consensus of up 1.0 percent in the Econoday survey of forecasters. The third quarter increase is consistent with the quarterly pace of gains for the prior four quarters. The index for wages and salaries is up 1.2 percent quarter-over-quarter in the third quarter, faster than the up 1.0 percent in the second quarter, but in line with the trend of the past two years. The third quarter increase in the index for benefits costs is up 0.9 percent, the same as the second quarter, matching the 0.9 percent in the third quarter 2021 and the lowest since up 0.4 percent in the second quarter 2021.
Year-over-year the employment cost index for total compensation is up 4.3 percent, falling from 4.5 percent in the second quarter and 4.8 percent in the first quarter of this year. The third quarter is the lowest since up 4.0 percent in the fourth quarter 2021. While the annual pace remains strong, it is decelerating steadily. The year-over-year increase for the index for wages and salaries is up 4.6 percent, the same as in the second quarter, and the lowest since up 4.5 percent in the fourth quarter 2021. The index for benefits costs is up 4.1 percent, down 1 tenth from the prior quarter, and the lowest since 2.8 percent in the fourth quarter 2021. Upward price pressures for employee compensation are easing, but still elevated due to difficulties in finding workers with the right skills and/or experience.
Compensation continues to rise more for workers in the service sector and for state and local government than for goods producers. In the third quarter, the total compensation index is up 0.8 percent quarter-over-quarter and up 3.8 percent year-over-year for goods producers. Total compensation for the third quarter index for service workers is up 1.1 percent quarter-over-quarter and up 4.5 percent year-over-year, while the index for state and local government is up 1.5 percent quarter-over-quarter and up 4.8 percent year-over-year. Service providers have faced more competition for workers in that sector, especially for retail. State and local governments have had to raise pay for education and healthcare workers due to shortages of teachers and for hospital staffing.
Year-over-year the employment cost index for total compensation is up 4.3 percent, falling from 4.5 percent in the second quarter and 4.8 percent in the first quarter of this year. The third quarter is the lowest since up 4.0 percent in the fourth quarter 2021. While the annual pace remains strong, it is decelerating steadily. The year-over-year increase for the index for wages and salaries is up 4.6 percent, the same as in the second quarter, and the lowest since up 4.5 percent in the fourth quarter 2021. The index for benefits costs is up 4.1 percent, down 1 tenth from the prior quarter, and the lowest since 2.8 percent in the fourth quarter 2021. Upward price pressures for employee compensation are easing, but still elevated due to difficulties in finding workers with the right skills and/or experience.
Compensation continues to rise more for workers in the service sector and for state and local government than for goods producers. In the third quarter, the total compensation index is up 0.8 percent quarter-over-quarter and up 3.8 percent year-over-year for goods producers. Total compensation for the third quarter index for service workers is up 1.1 percent quarter-over-quarter and up 4.5 percent year-over-year, while the index for state and local government is up 1.5 percent quarter-over-quarter and up 4.8 percent year-over-year. Service providers have faced more competition for workers in that sector, especially for retail. State and local governments have had to raise pay for education and healthcare workers due to shortages of teachers and for hospital staffing.
Market Consensus Before Announcement
Forecasters see employment costs holding steady and elevated at 1.0 percent quarterly growth in the third quarter.
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.
