Q1 Employment Cost Index Preview
The Q1 Employment Cost Index is expected at 0.8% following a 0.8% increase in Q4 and Q3. This would leave y-o-y ECI unchanged at 3.3%. Q1 wages and salaries are expected to increase 0.8% following a 0.8% increase in Q4, and Q1 benefits are expected to increase 0.7% from a 0.9% increase in Q4.
The continued fallout in US housing combined with financial market disruptions and an expected economic slowdown are all likely to weigh on wages, especially bonuses and commissions; however, declines in overall employment may mitigate reductions in overall wages while maintaining strength in per-unit wage growth. The Mar. Employment report showed a 0.9% increase in Q1 average hourly earnings from a 0.7% gain in Q4.
The Employment Cost Index, released quarterly, is unlikely to have a significant market impact since it is a lagging indicator. It will be interesting to see if inflation continues to outpace wages — potentially having a deteriorative effect on real earnings and furthering depress consumer spending going forward.