| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Quarter over Quarter | 1.0% | 0.9% to 1.1% | 0.9% | 1.2% |
| Year over Year | 4.1% | 4.2% |
Highlights
Cooling in the employment cost index will offer an upbeat note at the ongoing FOMC discussions. The ECI slowed to 0.9 percent in the second quarter from 1.2 percent in the first quarter and compared with Econoday's consensus for 1.0 percent. The second quarter's rate, however, is still elevated evident in year-over-year growth of 4.1 percent which is more than double the Fed's general 2.0 percent target.
Incremental cooling in wages & salaries led the improvement, slowing to 0.9 percent on the quarter from 1.1 percent with benefits slowing to 1.0 from 1.1 percent. Respective year-over-year rates are 4.2 from 4.4 percent and 3.8 from 3.7 percent.
The split between private and government sectors shows overall annual costs for the former slowing to 3.9 from 4.1 percent and edging higher to 4.9 from 4.8 percent for the latter. Wages & salaries as well as benefits rose for government, 5.1 from 5.0 percent and 4.8 from 4.5 percent, respectively.
The headline result is cooler than expected but still within Econoday's consensus range, as is the US Relative Performance Index which is close to the zero line at minus 5 and at plus 2 when excluding inflation data like the ECI. In sum, recent US data are meeting forecasts.
Incremental cooling in wages & salaries led the improvement, slowing to 0.9 percent on the quarter from 1.1 percent with benefits slowing to 1.0 from 1.1 percent. Respective year-over-year rates are 4.2 from 4.4 percent and 3.8 from 3.7 percent.
The split between private and government sectors shows overall annual costs for the former slowing to 3.9 from 4.1 percent and edging higher to 4.9 from 4.8 percent for the latter. Wages & salaries as well as benefits rose for government, 5.1 from 5.0 percent and 4.8 from 4.5 percent, respectively.
The headline result is cooler than expected but still within Econoday's consensus range, as is the US Relative Performance Index which is close to the zero line at minus 5 and at plus 2 when excluding inflation data like the ECI. In sum, recent US data are meeting forecasts.
Market Consensus Before Announcement
After the first quarter's 1.2 percent increase, forecasters see employment costs easing to 1.0 percent in the second 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.
