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Economy in Brief

Employment Cost Growth Edges Up
by Sandy Batten  April 30, 2020

• Growth of overall compensation unexpectedly picked up to 0.8% q/q in 2020 Q1.

• Wages and salaries growth accelerated while benefits slowed.

The employment cost index (ECI) for civilian workers rose 0.8% q/q in the first quarter of 2020, up slightly from a 0.7% q/q rise in last year's fourth quarter. This was contrary to the Action Economics Forecast Survey which had looked for compensation growth to slow to 0.6% q/q. Year-on-year growth of total compensation also picked up slightly to 2.8% y/y in Q1 versus 2.7% in Q4. Annual compensation growth hit a cycle high of 2.9% in 2018 Q4.

Wage and salaries increased 0.9% q/q in Q1 (3.1% y/y), a reacceleration from the 0.7% gain in Q4. Year-on-year growth rose to 3.1% from 2.9% in Q4 to match 2018 Q4 as the fastest pace of wage and salaries growth since 2008 Q2. In contrast, benefits growth slowed to 0.4% q/q (2.1% y/y) from 0.6% in Q4. The year-on-year gain in Q1 was the softest since 2016 Q4.

In the private sector, compensation also rose 0.8%, but this reflected a larger quarterly rise in wages and salaries than in the overall economy (1.0% q/q vs. 0.9%) and a larger slowdown in benefits (0.2% q/q vs. 0.4%). Compensation in goods-producing industries decelerated to 0.5% in Q1 from 0.7% in Q4 while compensation in service-providing industries picked up considerably to 0.9% in Q1 from 0.6% in Q4. The Q1 rise in service-sector compensation was the highest since 2007 Q3.

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) Q1'20 Q4'19 Q3'19 Y/Y 2019 2018 2017
Compensation 0.8 0.7 0.7 2.8 2.7 2.8 2.5
 Wages & Salaries 0.9 0.7 0.8 3.1 2.9 2.9 2.5
 Benefit Costs 0.4 0.6 0.6 2.1 2.4 2.7 2.4
Private Industry Workers (% chg)    
Compensation 0.8 0.7 0.7 2.8 2.7 2.9 2.5
 Wages & Salaries 1.0 0.7 0.8 3.3 3.0 3.0 2.6
 Benefit Costs 0.2 0.5 0.5 1.6 2.0 2.6 2.2
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