Employment Cost Index Rises As Expected

Wage costs and benefit costs eased off in the fourth quarter but the trend remains significantly firm. The employment index rose an as-expected 0.6 percent in the fourth quarter which is down 1 tenth from the third quarter -- yet the year-on-year rate continues to move higher, up 1 tenth to 2.6 percent. This rate was last matched in first-quarter 2015 and is otherwise the highest of the post-2008 expansion.

The breakdown between the wages & salaries component and the benefits component show similar pressure. This report won't raise any red flags at today's FOMC meeting but it will certainly be cited as a further indication of tightness in the labor market, conditions that could be pointing to a future inflationary flashpoint for wages.

Recent History Of This Indicator:
Another quarter of emerging wage pressures is the expectation for the fourth-quarter employment cost index where forecasters are calling for a 0.6 percent rise. The ECI jumped 0.7 percent in the third quarter for a year-on-year 2.5 percent, both near the highest rates of the expansion. Pressures in the third-quarter report were evenly split between wages and benefits.