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Quicktake: Nomura on Employment Cost Index

US DATA
Due to the pandemic, Nomura economists say wage growth as measured by the employment cost index (ECI) has "decelerated" modestly "since the start of the pandemic, registering 2.6% in Q4 2020, down from 3.2% in Q1."
  • In Q1 2021, we expect wages and salaries to increase 0.6% q-o-q, corresponding to 2.3% y-o-y. While monthly average hourly earnings (AHE) readings have been distorted by compositional changes, the ECI better captures trend wage growth by measuring employment costs for specific jobs.
  • Wage growth for continuously employed workers slowed further in Q1 2021 based on data from the CPS, which should correspond to a slowdown in ECI wage growth over the same period.
  • Moreover, ECI wage growth for retail trade employees jumped sharply in Q4, rising 2.1% q-o-q, the largest increase since 2001. Nomura expects "payback in Q1 2021. For total ECI, including benefits, we expect a 0.6% q-o-q increase, corresponding to 2.4% y-o-y."
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