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Economy in Brief

U.S. Employment Costs Continued to Post Robust Gains in Q4
by Kathleen Stephansen, CBE  January 28, 2022

• Overall compensation rose 1.0% q/q in Q4, though shy of the 1.3% Q3 gain.

• Wages and salaries rose 1.1% q/q.

• Benefits increased 0.9% q/q in Q4, a similar gain to Q3.

As the U.S. economy continues to improve, employment costs continue to rise. The employment cost index (ECI) for civilian workers increased 1.0% q/q (4.0% y/y) in Q4. That follows a quarterly jump of 1.3% (3.7% y/y) in the third quarter, its largest quarterly gain since Q1 2001. Action Economics Forecast Survey consensus had looked for a slightly stronger gain of 1.2% q/q in Q4.

The overall increase was driven by robust gains in both wages and salaries and benefits. Wage and salaries rose 1.1% q/q (4.5% y/y) in Q4, following the 1.5% q/q (4.2% y/y) rise in Q3, which was the largest quarterly increase since Q1 1984. Benefits were up 0.9% q/q (2.8% y/y), following the 0.9% q/q (2.5% y/y) rise in Q3.

Private sector compensation rose 1.2% q/q (4.4% y/y) in Q4, following the 1.4% q/q (4.1% y/y) rise in Q3, which was the largest quarterly gain since Q1 2001. Private sector wages and salaries advanced 1.2% q/q (5.0% y/y) up from a 1.6% (4.6% y/y) rise in Q3, which was also the largest quarterly gain since Q3 1982. Private sector benefits rose 1.0% q/q (2.9% y/y), after the 1.1% q/q (2.6% y/y) rise in Q3.

Compensation in goods-producing industries increased 0.9% q/q (3.7% y/y) in Q4, after a similar rise of 0.9% q/q (3.3% y/y) in Q3. Compensation in service-providing industries gained 1.1% q/q (4.1% y/y) following a jump of 1.3% q/q (3.7% y/y) in Q3, which was the largest quarterly rise in this series' short history dating back to 2003.

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.

Civilian Workers (% chg) Q4'21 Q3'21 Q2'21 Y/Y 2021 2020 2019
Compensation 1.0 1.3 0.7 4.0 3.3 2.6 2.7
 Wages & Salaries 1.1 1.5 0.9 4.5 3.7 2.8 2.9
 Benefit Costs 0.9 0.9 0.4 2.8 2.5 2.2 2.4
Private Industry Workers (% chg)    
Compensation 1.2 1.4 0.8 4.4 3.6 2.6 2.7
 Wages & Salaries 1.2 1.6 1.0 5.0 4.0 2.9 3.0
 Benefit Costs 1.0 1.1 0.3 2.9 2.5 1.9 2.0
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