The Employment Cost Index (ECI) rose 0.5 percent in the fourth quarter, breaking a string of three consecutive increases of 0.7 percent. Weak economic growth and a sluggish labor market continued to put downward pressure on wage and salary growth. Government wage and salary growth plummeted to 0.4 percent.

Total Compensation Lowest on Record

  • Total compensation rose 2.6 percent year-over-year, the slowest pace on record, as economic growth continues to contract and the labor market remains sluggish. Wages and salaries were up 2.7 percent year-over-year.
  • The slower pace suggests employment costs will not be a concern for labor inflation pressure.

Government Wages and Salaries Fell

  • Private industry wages and salaries remained steady, but benefits fell to 0.4 percent as companies looked to shave costs. Government wages and salaries fell to 0.4 percent from 1.0 percent, but benefits increased 0.8 percent.
  • We expect ECI will continue to fall in coming quarters as wage freezes are implemented and employee benefits are cut back.