Employment Cost Index (ECI) – Third Quarter 2016

While the concept of Americans’ incomes can be defined in a number of ways, many prominent measures continue to show disconcerting trends.

One prominent measure is the Employment Cost Index (ECI).

Here is a description from the BLS document titled “The Employment Cost Index:  what is it?“:

The Employment Cost Index (ECI) is a quarterly measure of the change in the price of labor, defined as compensation per employee hour worked. Closely watched by many economists, the ECI is an indicator of cost pressures within companies that could lead to price inflation for finished goods and services. The index measures changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. As a fixed-weight, or Laspeyres, index, the ECI controls for changes occurring over time in the industrial-occupational composition of employment.

On October 28, 2016, the ECI for the third quarter was released.  Here is an excerpt from the October 28, 2016 Wall Street Journal article titled “U.S. Employment Costs Rose .6 Percent in Third Quarter“:

The employment-cost index for civilian workers, a broad measure of wages and benefits, rose by a seasonally adjusted 0.6% during the third quarter, the Labor Department said Friday.

The gauge also had increased 0.6% in each of the prior two quarters, and economists surveyed by The Wall Street Journal had anticipated another rise of 0.6% in the latest quarter.

Wages and salaries, which account for more than two-thirds of compensation expenses, rose 0.5% in the July-to-September period. Benefits were up 0.7%.

From a year earlier, total compensation costs rose 2.3% in the third quarter, steady from the second quarter. Wages and salaries were up 2.4% on the year in the third quarter and benefits rose 2.3%.

Below are three charts, updated on October 28, 2016 that depict various aspects of the ECI, which is seasonally adjusted (SA):

The first depicts the ECI, with a value of 127.4:

source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian[ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed October 28, 2016:

https://research.stlouisfed.org/fred2/series/ECIALLCIV/

The second chart depicts the ECI on a “Percent Change from Year Ago” basis:

The third chart depicts the ECI on a “Percent Change” (from last quarter) basis:

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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2126.41 as this post is written