A measure of total employee compensation costs, including wages and salaries as well as benefits. The employment cost index (ECI) is the broadest measure of labor costs. Why Investors Care
| Released on 10/31/08 For Q3 2008 | |||||||||||||||||
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Highlights
The cost of labor remained mild in the third quarter, data that will put aside any practical concern over the risk of inflation. The employment cost index rose 0.7 percent in the third quarter, unchanged from both the second and first quarters, while the year-on-year rate of 2.9 percent is down 2 tenths vs. the second quarter and down 4 tenths vs. the first quarter.
This series measures benefit costs which used to be a sore spot for policy makers who complained they were rising too fast. Not anymore. Benefit costs rose only 0.6 percent in the third quarter, the same rate as both the second and first quarters, with the year-on-year rate down 3 tenths to a very mild 2.6 percent. Wages & salaries, the series' second major component, rose 0.7 percent in the quarter for a 3.1 percent pace.
These year-on-year rates are well below the quarter's 5 percent rates for consumer inflation, a gap confirming the loss of consumer purchasing power. Consumer inflation appears to be on the way down as are labor costs, where increases look to ease even further given the deepening declines in payrolls.
The 2008 crash and credit squeeze have pushed inflationary risks deep into the background. Policy makers may at times still cite the risk of inflation, but they are focused squarely on the urgent necessity of stimulating demand. The ECI was released along with a very weak personal spending and personal income report that confirms weakness on the income side. Money moved into the Treasury market in immediate reaction to the 8:30 data.
The employment cost index for civilian workers has been relatively well behaved recently despite earlier higher inflation for key consumer staples of gasoline and food prices. The employment cost index for the second quarter rose 0.7 percent (not annualized) from the first quarter for a year-on-year rise of 3.1 percent, the latter down 2 tenths from the prior two quarters. Deceleration was centered in benefits where the 2.9 percent year-on-year pace is down from 3.5 percent in the first quarter. The quarter-to-quarter gain for this component held at 0.6 percent for a second straight quarter, down from 0.8 percent gains in the prior two quarters. This reflects, among other cutbacks, employers asking employees to pay higher medical deductibles. The wages & salaries component showed a 0.7 percent quarter-to-quarter gain, down from a string of 0.8 percent readings. The year-on-year rate is unchanged at 3.2 percent.
Employment cost index Consensus Forecast for Q3 08: +0.7 percent simple quarterly rate
Range: +0.3 to +0.8 percent simple quarterly rate
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The employment cost index measured total compensation costs which include wages and salaries and also benefits. Benefits include vacations, but the primary mover is health insurance premiums. |
| 2008 Release Schedule | ||||||||||
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