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Economy in Brief

Employment Cost Index Steady Last Quarter, Down During '05
by Tom Moeller January 31, 2006

For private industry workers, the employment cost index rose a steady 0.8% last quarter. The increases during the last two quarters were up from 0.6% gains during 1Q & 2Q but they were off the 1.0% average of the prior two years. Consensus expectations had been for a 0.9% 4Q increase.

The 2.8% increase in the ECI during 2005 was the lowest in ten years.

The increase in benefit costs eased last quarter to 0.9% from the quick 1.3% during 3Q. For the full year, the rise in benefit costs moderated substantially to 4.1% from the peak 7.1% increase during 2004. Benefit costs in manufacturing rose 1.3% (4.9% y/y). The yearly increase compared to a 10.1% rise during 2004.

The cost of health benefits rose 6.4% y/y and for the year was the slowest rate on increase since 1999.

Wage and salary growth continued at 0.6% for the fourth straight quarter. The annual gain of 2.5% about equaled 2004 but was down sharply from the 4.0% increase during 1997. Wages account for roughly 70% of the compensation index.

Gauging the Size of Today's Price Shocks from the Federal Reserve Bank of St. Louis is available here.

ECI- Private Industry Workers 4Q '05 3Q '05 Y/Y 2005 2004 2003
Compensation 0.8% 0.8% 2.8% 2.8% 3.9% 4.2%
  Wages & Salaries 0.6% 0.6% 2.5% 2.5% 2.4% 3.0%
  Benefit Costs 0.9% 1.3% 4.1% 4.1% 7.1% 6.6%
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