Q1 Employment Cost Index
Updated 30-Apr-09 09:41 ET
Highlights
- The employment cost index (ECI) for the first quarter rose just 0.3% (not annualized). This is lower than expected and continues a trend toward smaller increases in costs to employers of compensation.
- Wages and salaries were up just 0.3%. Benefits rose 0.5%. The year-over-year increase in the total index fell to just 2.1% from 2.6% through the fourth quarter.
Key Factors
- Wages and salaries are up just 2.2% over the past year and benefits 2.0%. These lower increases for compensation reduce cost-push inflation pressure for businesses.
- For those looking for higher wage gains, government compensation costs were up 0.8% in the first quarter, and are up 3.1% over the past year. Apparently, private sectors reel in their costs more easily than governments.
Big Picture
- Employment costs are the major component of business costs. The trend in these data therefore have important implications for cost-push inflationary pressures and for profit margins. In recent quarters, the trend has been relatively steady to lower. The year-over-year total increase in the ECI has dropped below 3% for the first time in years. Weak overall demand in the economy should keep the ECI cost index on the current trend. At 2.1% this does not represent much inflationary pressure, as productivity gains of close to 2% leave unit labor costs rising at a modest pace near 1%. Now, with commodity prices having turned lower and economic demand softening, there simply is not much overall inflationary pressure at all.
| Category |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
| Quarterly Changes |
|
|
|
|
|
| Total ECI |
0.3% |
0.6% |
0.6% |
0.7% |
0.7% |
| Wages and Salaries |
0.3% |
0.5% |
0.7% |
0.7% |
0.7% |
| Benefits |
0.5% |
0.5% |
0.6% |
0.6% |
0.6% |
| Year/Year Changes |
|
|
|
|
|
| Total ECI |
2.1% |
2.6% |
2.9% |
3.1% |
3.3% |
| Wages and Salaries |
2.2% |
2.7% |
3.1% |
3.2% |
3.2% |
| Benefits |
2.0% |
2.2% |
2.6% |
2.9% |
3.5% |
