Need To Know News

The Employment Cost Index for civilian compensation increased 0.7% between March and June. That matched the March increase and was in line with analysts expectations.

Wages for civilian workers increased 0.7% after a 0.8% increase during the December to March time period. Benefit costs rose 0.6%, this partly reflected a decline in benefits for manufacturing employees during the three-months ended in June.

Private sector wages and salaries rose 0.7% but benefits costs rose only 0.5%. Consequently, overall benefits rose only 0.6%. That was the smallest increase in the private sector compensation number since March 2006. Workers in real estate showed a 0.2% increase in compensation partly reflecting the impact of falling housing prices and fewer sales on commission-based pay in that sector.

On a year-over-year basis, compensation for civilian workers rose 3.1% and wages and salaries rose 3.2%. Private sector workers showed compensation increases of 3% from last June compared with a 3.1% increase in wages for that group.

The Q2 Employment Cost Index is expect to be up 0.7%, the same increase as Q1 and below the Q7 ‘07 increase of 0.8%. The Q1 report showed inflation effects with wages falling across all categories from 0.6% in management, professional and related occupations to a 1.1% drop in sales and office production, transportation, and material moving. Overall private industry wages were down 0.8%.

Employment Costs are expected to rise 3.1% on a year-on-year basis versus a 3.3% pace in Q1 and would be the lowest level since 1996.

Equity indices have reversed direction again with short covering into data-rich tomorrow. At 8:30am EST, Advance Q2 GDP, Initial Jobless Claims and the Employment Cost Index are out. There is potential for GDP to surprise on the upside due to the stimulus payments. Initial Claims have been volatile of late with a plus 400k reading last week. Readings of over 400k are associated with recessions but the last plus 400k readings have been followed by a plunge in the following week’s Claims data. The ECI is likely to reflect lower costs overall due to higher unemployment and real wages are likely to still be on the downside.

The Q2 Employment Cost Index is expect to be up 0.7%, the same increase as Q1 and below the Q7 ‘07 increase of 0.8%. The Q1 report showed inflation effects with wages falling across all categories from 0.6% in management, professional and related occupations to a 1.1% drop in sales and office production, transportation, and material moving. Overall private industry wages were down 0.8%.

Employment Costs are expected to rise 3.1% on a year-on-year basis versus a 3.3% pace in Q1 and would be the lowest level since 1996.

The Employment Cost Index’s Total Civilian Compensation for Q1 ‘08 increased 0.7%, just under the 0.8% reading in Q4 ‘07.

Total Civilian Compensation y-o-y was up 3.3% compared to 3.5% in Q1 ‘07. Civilian wages and salaries grew 0.8% in Q1 following a 0.8% gain in Q4.

Wages and salaries were up 3.2% y-o-y following a 3.6% reading in Q1 ‘07. Benefit costs increased 0.6% following a 0.8% increase the prior quarter.

Private industry employment costs grew slightly faster than state and local government employment costs in Q1. Benefit costs for private industry grew 0.6% compared to mere 0.3% gain in the public sector.

When adjusted for prices, total compensation y-o-y fell 0.7% in Q1, an indication of inflation’s deteriorating effect on wages. Wage increases in Q1 did not keep pace with rising prices.

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.

The Employment Cost Index’s Total Civilain Compensation for Q4 2007 increased 0.8%, in line with expectations and indentical to Q3’s 0.8% increase.

Total Civilian Compensation Y-o-Y grew 3.3%, which was consistent with the 3.3% reported in Q4 2006. Civilian Wages increased 0.8% Q-o-Q and 3.4% Y-o-Y. Benefit costs for Civilians increased 0.9% Q-o-Q, a slight acceleration from Q3’s 0.8%. However, the Y-o-Y change in Benefit costs slowed to 3.1% from 3.6% in Q3.

The Employment Cost Index for Q4, released tomorrow at 8:30am EST, is projected to rise 0.8%. The ECI measures changes in the cost of labor, including salaries, wages, and benefits.

Tomorrow’s reading follows a 0.8% increase for Q3 (reported in October).

Wage pressures tend to increase in times of economic expansion. ECI has been fairly steady (0.8-0.9%) since spring 2006, but could be weaker for Q4 ’07 as the US economy registered bleaker-than-expected Q4 GDP data today — a meager 0.6% rise in overall US economic expansion.

The FED has expressed some concern regarding labor markets of late so if ECI comes in higher than expected, it could reinforce, in part, the FED’s aggressive rate cuts.

Q3 Employment Cost Index up 0.8%, marginally less than the expected 0.9% on a quarterly basis. Wages and Benefit costs were both up 0.8% in the June through September period. On an annual basis, Compensation rose 3.3%, unchanged from last quarter’s reading. Wages rose 3.3% on an annual basis, nearly unchanged from the Q2 reading of 3.4%. On a quarter-on-quarter basis, benefit costs fell from 1.3% to .8%. Service worker wages and salaries increased the most at 1.5% versus no increase in wages in the Production, Transportation and Material moving industry. State and Local Government wages increased on par with Management, Professional and related jobs at 0.7%. The smaller than expected increase suggests inflationary pressures, via compensation, are at bay.

The Employment Cost Index measures the change in the cost of labor including salaries, wages and benefits and is reported 4 times a year.  The reading this Wednesday is the last of the year.  ECI topped out at .90 this year with a low reading of .80 in July.  Wage pressures tend to go along with a good economy and have essentially been falling since they reached 1.20 in March of 2004.  The consensus estimate for ECI this quarter is .90%, unchanged from the July reading.  The  FED will  have these data at the FOMC meeting this week but it will be of lesser importance than Q3 Advance GDP.  Indeed, if the FOMC still has inflation on the back burner and credit markets on the front, these data may not be in the FED’s musings at all.  ECI comes out this Wednesday at 8:30am and will likely be over-shadowed  by Q3 GDP which is released at the same time.