| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Quarter over Quarter | 0.9% | 0.8% to 1.0% | 1.2% | 0.9% | |
| Year over Year | 4.2% | 4.2% | 4.3% |
Highlights
The employment cost index (ECI) for the first quarter 2024 is up 1.2 percent quarter-over-quarter after rising 0.9 percent in the fourth quarter. It is the same as the 1.2 percent in the first quarter 2023. The increase is above the consensus of up 0.9 percent in the Econoday survey of forecasters.
The index for total wages and salaries rose 1.1 percent in the first quarter, the same as in the fourth quarter 2023. However, the pace of increases for benefits costs picked up, rising 1.1 percent in the first quarter after 0.7 percent in the fourth quarter. Benefits costs often rise in January as new contracts for healthcare go into effect. The increase in wages and salaries may include some of the mandated changes in minimum wages as well as increased competition for experienced workers.
The year-over-year increase for the ECI for total compensation rose 4.2 percent in the first quarter 2024, reflecting a slight downward trend after 4.3 percent in the third and fourth quarters 2023 and 4.5 percent in the second quarter and 4.8 percent in the first quarter.
The deceleration is present in wages and salaries, but less so than for benefits. The pace of increases for wages and salaries is decelerating modestly at 4.3 percent in the first quarter 2024 compared to 2023 with 4.5 percent in the fourth quarter, 4.5 percent in the third quarter, 4.7 percent in the second quarter and 5.0 percent in the first quarter. The first quarter 2024 increase is the slowest since 4.1 percent since the third quarter 2021. However, tightness in the labor market especially for skilled workers and/or where the labor supply is lean means that wages and salaries are not dropping rapidly.
However, employers are seeing less upward pressure on the costs of benefits compared to a year ago. In the first quarter 2024, the index for benefits was up 3.7 percent, its slowest rise since 2.8 percent in the fourth quarter 2021.
Upward pressures on employee compensation remain elevated compared to the pre-pandemic period and are showing on tempered changes. The narrow improvement in labor supply and modest cooling in economic activity have helped reduce the churn in the labor market and employers' costs to attract and retain workers. Nonetheless, workers are earning more and employers need to keep up with the demands in the job market.
The index for total wages and salaries rose 1.1 percent in the first quarter, the same as in the fourth quarter 2023. However, the pace of increases for benefits costs picked up, rising 1.1 percent in the first quarter after 0.7 percent in the fourth quarter. Benefits costs often rise in January as new contracts for healthcare go into effect. The increase in wages and salaries may include some of the mandated changes in minimum wages as well as increased competition for experienced workers.
The year-over-year increase for the ECI for total compensation rose 4.2 percent in the first quarter 2024, reflecting a slight downward trend after 4.3 percent in the third and fourth quarters 2023 and 4.5 percent in the second quarter and 4.8 percent in the first quarter.
The deceleration is present in wages and salaries, but less so than for benefits. The pace of increases for wages and salaries is decelerating modestly at 4.3 percent in the first quarter 2024 compared to 2023 with 4.5 percent in the fourth quarter, 4.5 percent in the third quarter, 4.7 percent in the second quarter and 5.0 percent in the first quarter. The first quarter 2024 increase is the slowest since 4.1 percent since the third quarter 2021. However, tightness in the labor market especially for skilled workers and/or where the labor supply is lean means that wages and salaries are not dropping rapidly.
However, employers are seeing less upward pressure on the costs of benefits compared to a year ago. In the first quarter 2024, the index for benefits was up 3.7 percent, its slowest rise since 2.8 percent in the fourth quarter 2021.
Upward pressures on employee compensation remain elevated compared to the pre-pandemic period and are showing on tempered changes. The narrow improvement in labor supply and modest cooling in economic activity have helped reduce the churn in the labor market and employers' costs to attract and retain workers. Nonetheless, workers are earning more and employers need to keep up with the demands in the job market.
Market Consensus Before Announcement
Forecasters see employment costs rising a quarterly 0.9 percent in the first quarter as they did 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.
