Employment Cost Index (ECI) – Second 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 July 29, 2016, the ECI for the second quarter was released.  Here is an excerpt from the July 29, 2016 Wall Street Journal article titled “U.S. Employment Costs Up .6 Percent in Second Quarter“:

The employment-cost index, a broad measure of workers’ wages and benefits, grew a seasonally adjusted 0.6% during the second quarter of 2016, the Labor Department said Friday. Economists surveyed by The Wall Street Journal had forecast the 0.6% rise.

The first-quarter gain was unrevised at 0.6%.

Wages and salaries, reflecting more than two-thirds of compensation costs, advanced 0.6% last quarter. Benefits rose 0.5%.

From a year earlier, total compensation increased 2.3%, a slight acceleration from the 1.9% annual gain recorded in the prior quarter.

Below are three charts, updated on July 29, 2016 that depict various aspects of the ECI, which is seasonally adjusted (SA):

The first depicts the ECI, with a value of 126.7:

ECIALLCIV_7-29-16 126.7

source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian[ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed July 29, 2016:


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

ECIALLCIV_7-29-16 Percent Change From Year Ago

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

ECIALLCIV_7-29-16 Percent Change From Last Quarter


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.


The Special Note summarizes my overall thoughts about our economic situation

SPX at 2176.24 as this post is written