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Economy in Brief

U.S. Employment Cost Index Remains Sluggish; State & Local Govt Flat
by Carol Stone   October 29, 2010

The employment cost index for private industry workers slowed to a 0.4% increase in Q3 total compensation from 0.5% growth in Q2. The year-on-year gain was 2.0%, a little bit better than Q2's 1.9%. For all civilian workers, the quarterly increase was also 0.4%, compared with forecast expectations of 0.5%.

Workers in state and local governments experienced flat compensation on the quarter, following a 0.6% increase in Q2. This brought the year-on-year increase to 1.7% in Q3 from 1.8% the quarter before. This yearly change is a record low for this series that began in 1982; before this year, the lowest such reading had been 2.3% in a couple of quarters during 1997 and 1998.

Growth in private sector wages & salaries held steady at 0.4% for a third consecutive quarter. Among occupational groups, wages of management and professional workers and of sales and office workers grew more slowly; those of natural resource, construction and maintenance workers held to a slim 0.2% increase, while those of production and transportation workers picked up compared to their Q2 performances. Factory sector wages grew 0.5%, the same as in Q2, and workers in service industries sustained their recent range with a 0.4% increase.

Wages of state and local government workers fell outright by 0.3%. This is the second quarterly decrease ever; the other one, 0.1%, was in Q3 last year. This time, workers in all segments of state and local government -- education, health care and public administration -- experienced the declines. We would speculate that these reflect the budget pressures many governments are facing, as many of them also have fiscal years that began July 1.

The growth in benefit costs in the private sector repeated the 0.5% rise of 2Q in Q3, with mixed moves of modestly bigger or smaller gains among occupational segments. Benefits for state and local government workers rose, but they moderated to a 0.7% rise following 0.9% in Q2.

The employment cost index figures are available in Haver's USECON database.

ECI - Private Industry Workers (%) Q3 '10 Q2 '10 Q1 '10 Q3 Y/Y 2009 2008 2007
Compensation 0.4 0.5 0.6 2.0 1.5 2.8 3.1
 Wages & Salaries 0.4 0.4 0.4 1.6 1.5 3.0 3.4
 Benefit Costs 0.5 0.5 1.4 2.8 1.2 2.6 2.4
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