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Economy in Brief

U.S. Employment Cost Index Moderates to 0.8% Quarterly Increase
by Carol Stone October 31, 2007

The employment cost index slowed to an 0.8% advance for private industry workers in Q3, compared to 0.9% in Q2 and a Consensus forecast of 0.9%.

Wage and salary growth held at the 0.8% quarterly pace seen in Q2, with the year/year growth also at Q2's amount, 3.4%. Wages account for roughly 70% of the compensation index. The largest recent increase was 1.1% in Q1, driven by outsized increases in several industries.

Benefit costs dropped back from Q2's 1.1% to 0.8%; this put the year/year increase at 2.4%. For the first three quarters this year, the year/year growth rates are the lowest since 1998. This is at least in part due to a more moderate rise in the cost of health benefits, which was up 4.8% y/y again in Q3, the same as in Q2 and less than half the pace of 2002 and 2003.

Compensation costs also eased for state and local government workers. This group saw a rise of 0.8% in Q3, less than 1.1% in Q2 and 1.3% in Q1 and the lowest since Q1 2006. The move was in benefits, which rose "only" 0.7% in Q3, following 1.7% in Q2 and 2.1% in Q1. Wages and salaries actually picked up in Q3 to 1.0% from 0.8% in Q2.

ECI- Private Industry Workers 3Q 2Q 1Q Y/Y 2006 2005 2004
Compensation 0.8% 0.9% 0.6% 3.1% 2.9% 3.1% 3.8%
  Wages & Salaries 0.8% 0.8% 1.1% 3.4% 2.9% 2.5% 4.7%
  Benefit Costs 1.1% 1.1% -0.3% 2.7% 2.9% 4.6% 6.8%
ECI- State & Local Government Workers 0.8% 1.1% 1.3% 4.3% 3.9% 3.8% 3.4%
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