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Economy in Brief

Employment Cost Growth Rangebound
by Gerald D. Cohen  January 31, 2020

• Overall compensation increased 0.7% in Q4 (2.7% y/y), little changed from recent trends.

• Wages and salaries up 0.7% (2.9% y/y) while benefits gain 0.5% (2.2% y/y).

The employment cost index (ECI) for civilian workers rose 0.7% in the fourth quarter of 2019, in line with expectations from the Action Economics Forecast Survey, and the same increase as Q3. Year-on-year growth of total compensation decelerated slightly to 2.7% in Q4. Compensation growth hit a cycle high of 2.9% in 2018Q4.

Wage and salaries also increased 0.7% in Q4 (2.9% y/y), a deceleration from the 0.9% gain in Q3. Year-on-year growth has been 2.9% for the entirety of 2019 after hitting a cycle high of 3.1% in 2018Q4. In contrast, benefits slowed to 0.5% (2.2% y/y), the softest year-on-year gain in two years.

Private sector compensation, wages and salaries, as well as benefits showed a similar pattern to all civilian workers (see table below for details). Compensation in both goods-producing and service-providing industries grew 0.6% in Q4 (3.0% and 2.7% y/y respectively). Overall pay for non-incentive paid occupations increased 0.4% (not seasonally adjusted) and 2.7% y/y, little changed from trends of the last two years (see lower left hand graph).

The employment cost index, which measures the change in the cost of labor, free from the influence of employment shifts among occupations and industries, is available in Haver's USECON database. Consensus estimates from the Action Economics survey are in Haver's AS1REPNA database.

Civilian Workers (% chg) Q4'19 Q3'19 Q2'19 Q4'19 Y/Y 2019 2018 2017
Compensation 0.7 0.7 0.6 2.7 2.7 2.8 2.5
 Wages & Salaries 0.7 0.9 0.7 2.9 2.9 2.9 2.5
 Benefit Costs 0.5 0.6 0.5 2.2 2.4 2.7 2.4
Private Industry Workers (% chg)    
Compensation 0.7 0.8 0.5 2.7 2.7 2.9 2.5
 Wages & Salaries 0.7 0.9 0.6 3.0 3.0 3.0 2.6
 Benefit Costs 0.5 0.5 0.4 1.9 2.0 2.6 2.2
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