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Economy in Brief

U.S. Q3 ECI Still Elevated But Offered a Hint of Moderation
by Sandy Batten  October 28, 2022

• Employment costs rose 1.2% y/y but y/y rate slowed to 5.0%.

• Both wage & salaries and benefits slowed slightly in Q3.

• Rise in labor costs in the private sector slowed even more.

With labor costs having accelerated sharply over the past year, the third quarter employment cost report offered a hint of moderation. The employment cost index (ECI) for civilian workers increased 1.2% q/q in Q3, down slightly from a 1.3% quarterly gain in Q2. Though the quarterly figure remained elevated, the annual pace of increase fell slightly to 5.0% y/y from 5.1%, which was the fastest annual advance since Q3 1990. This was the first decline in the y/y rate since Q3 2020. The Action Economics Forecast Survey had expected a 1.2% quarterly gain in Q3.

Growth of wages and salaries slowed to 1.3% q/q in Q3 from 1.4% in Q2 with the annual rate declining to 5.1% y/y from 5.3%. Benefits growth also slowed to 1.0% q/q in Q3 from 1.2% in Q2 and an outsized 1.8% in Q1 but the annual rate ticked up to 4.9% y/y from 4.8%.

Labor costs in the private sector provided an even stronger hint of moderation in Q3. Private-sector compensation rose 1.1% in Q3, down from a 1.5% jump in Q2, with the y/y rate declining to 5.2% from 5.5% in Q2. Private-sector wages and salaries rose 1.2% q/q in Q3 versus a 1.6% gain in Q2 with the y/y rate slowing to 5.2% from 5.7%. Growth in private-sector benefits decelerated even more, advancing 0.8% q/q in Q3 versus 1.3% in Q2 with the y/y rate falling to 5.0% from 5.3%.

Growth in compensation in goods-producing industries slowed again in Q3, to 0.9% q/q (4.6% y/y) versus a 1.2% quarterly gain in Q2 and a 1.5% rise in Q1. Growth of compensation in service-providing industries slipped to 1.2% q/q (5.1% y/y) in Q3 from 1.4% in both Q1 and Q2.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver's USECON database. Consensus estimates from the Action Economics survey are in Haver's AS1REPNA database.

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