Global| Jan 31 2008U.S. Employment Cost Index Steady At 0.8% Quarterly Increase
by:Tom Moeller
|in:Economy in Brief
Summary
Rising 0.8% last quarter, the employment cost index for private industry workers remained steady with the 3Q increase. The gain matched Consensus expectations. Moreover, the gain in total compensation in 4Q was roughly steady at 3.0% [...]
Rising 0.8% last quarter, the employment cost index for private industry workers remained steady with the 3Q increase. The gain matched Consensus expectations. Moreover, the gain in total compensation in 4Q was roughly steady at 3.0% with the gains since 2005.
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 held at the 0.8% rate of 3Q. Wages account for roughly 70% of the compensation index. Wages in the services industries rose 0.8% (3.3% y/y). Wages in the leisure & hospitality sector have been relatively strong with a 4.2% rise and professional & business services wages also have been strong with a 4.0% y/y gain. Wages in the goods producing industries rose 0.9% (2.5% y/y) have lagged.
The gain in benefit costs also held about steady with a 0.9% 4Q rise. For all of last year, the 2.4% growth rate was the lowest since 1997. The slowdown has been pronounced in most service industries, but perhaps most pronounced in the goods producing sector where a 1.4% y/y growth rate last year is down from 8.7% growth in 2004.
The slowdown in benefit cost inflation for the year is due in part to a more moderate rise in the cost of health benefits:up 4.8% last year versus 10%+ rates of gain in 2002 and 2003.
| ECI- Private Industry Workers | 4Q '07 | 3Q '07 | 2Q '07 | 4Q Y/Y | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|---|
| Compensation | 0.8% | 0.8% | 0.9% | 3.0% | 3.1% | 2.9% | 3.1% |
| Wages & Salaries | 0.8% | 0.8% | 0.8% | 3.4% | 3.4% | 2.9% | 2.5% |
| Benefit Costs | 0.9% | 0.8% | 1.1% | 2.4% | 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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