Global| Jul 31 2008U.S. Employment Cost Index Increase Eased in 2Q
by:Tom Moeller
|in:Economy in Brief
Summary
The employment cost index for private industry workers increased by 0.6% last quarter and that was the weakest rate of gain since 1Q 2006. It fell short of Consensus expectations for a 0.7% rise. The rise held roughly steady the y/y [...]
The employment cost index for private industry workers increased by 0.6% last quarter and that was the weakest rate of gain since 1Q 2006. It fell short of Consensus expectations for a 0.7% rise. The rise held roughly steady the y/y growth in compensation at 3.0% which was steady with the gains of the last three years.
During the last twenty years there has been a 54% correlation between the growth in employee compensation and the rise in the PCE price index. That level of correlation goes neither up or down, when either series is led or lagged the other. This suggests a self reinforcing effect between the two series.
Wage and salary growth dipped slightly to 0.7% versus 0.8% increases during the prior four quarters. Wages account for roughly 70% of the compensation index. Wages in the services industries grew a steady 0.7% (3.1% y/y) while wages in the goods producing industries grew 0.6% (3.1% y/y) after the 1.0% pop during 1Q.
The rise in benefit costs slowed further to 0.5%. Year-to-year, the 2.6% rise in benefit costs in the service producing industries was roughly steady with the prior two years but down sharply from 4-6% growth back to 2000. In the goods producing sector benefits rose 0.3% (2.2% y/y). Health benefit costs rose a somewhat reduced 4.6% y/y.The Fed's announcement of steps to enhance the effectiveness of its existing liquidity facilities can be found here.
| ECI - Private Industry Workers | 2Q '08 | 1Q '08 | 4Q '07 | 2Q Y/Y | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|---|
| Compensation | 0.6% | 0.8% | 0.9% | 3.0% | 3.1% | 2.9% | 3.1% |
| Wages & Salaries | 0.7% | 0.8% | 0.8% | 3.1% | 3.4% | 2.9% | 2.5% |
| Benefit Costs | 0.5% | 0.6% | 0.8% | 2.6% | 2.4% | 2.9% | 4.6% |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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