| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Quarter over Quarter | 1.0% | 0.8% to 1.0% | 0.9% | 1.1% |
| Year over Year | 4.2% | 4.3% |
Highlights
Employment costs have been cooling but slowly, rising 0.9 percent on the quarter in the fourth quarter versus 1.1 percent in the third quarter. On a year-over-year basis, costs rose 4.2 percent versus 4.3 and 4.5 percent in the prior two quarters. It was in the fourth quarter of 2022 that the employment cost index peaked, at 5.1 percent.
Benefit costs have been easing a bit more than wages and salaries, the former rising 0.7 percent on the quarter for an annual rate of 4.9 percent and the latter rising 0.9 and 5.1 percent.
The ECI closely tracks average hourly earnings in the employment report which in Friday's release for the month of January are expected to rise 0.3 percent for an annual rate of 4.1 percent that woud be unchanged from December.
Wages are a central concern for policy makers and the slow pace of improvement, however steady, will not be pulling foward expectations for the Federal Reserve's first rate cut.
Benefit costs have been easing a bit more than wages and salaries, the former rising 0.7 percent on the quarter for an annual rate of 4.9 percent and the latter rising 0.9 and 5.1 percent.
The ECI closely tracks average hourly earnings in the employment report which in Friday's release for the month of January are expected to rise 0.3 percent for an annual rate of 4.1 percent that woud be unchanged from December.
Wages are a central concern for policy makers and the slow pace of improvement, however steady, will not be pulling foward expectations for the Federal Reserve's first rate cut.
Market Consensus Before Announcement
After the third quarter's 1.1 percent increase, forecasters see employment costs edging lower to 1.0 percent in the fourth 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.
