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Wage Pressure Showing Up In Biggest Empl Cost Rise Since 2007


With the Fed looking at broader metrics of labor market strength, many analysts are watching the employment cost index (ECI) as a key measure of wage inflation.

  • JPMorgan calls ECI this their "desert island indicator" for keeping track of wages. Compared to average hourly earnings, which have jumped due to low-wage jobs being lost (i.e. a denominator effect, "since the ECI calculates labor costs for a fixed basket of occupations across industries it won't suffer from this issue", writes JPM.
  • Data out today show this came in at +0.9% Q/Q in 1Q 2021, which was above expectations of 0.7% and the highest reading since 2Q 2007, with private industry comp +1.0% (up from +0.8% in Q4) and gov't comp +0.4% (down from +0.6% in Q4).
  • That private figure was the strongest since 2006 - suggesting wage pressures are picking up from the pandemic bottom, and are probably higher than what you might expect given still-high slack in the labor market as a whole (and given the BBG survey beat). See chart below.


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