Employment Cost Index On The Rise

The isolated hints of emerging price pressures now include employer costs. The employment cost index rose 0.8 percent in the first quarter which is the high end of expectations. The year-on-year rate is up 1 tenth to 2.7 percent for the highest reading of the last 10 years.

Wages & salaries, not benefits, are the leading source of pressure, up 0.9 percent in the quarter for an annual 2.7 percent increase. But benefits are also up, climbing 0.7 percent for 2.6 percent year-on-year.

This report is a red flag for next week's FOMC meeting and will certainly be cited, along perhaps with recent acceleration in average hourly warnings, as an indication of tightness in the labor market, conditions that point to the risk of wage-push inflation.