Wages & Benefit Costs Jump
- Following a soft Q1 performance, total employment costs accelerated in Q2, rising at the fastest quarterly pace since Q3 2008. Year over year, ECI rose at a 2.0 percent pace, consistent with the run-rate over the past four years. Private wages & salaries quadrupled the gain in Q1, rising 0.8 percent on the quarter. Benefit costs jumped 1.0 percent, bringing the year-over-year rate to 2.5 percent, its highest pace since Q1 2012.
An Inflection Point?
- The U.S. labor market has improved in the first half of the year with a stronger pace of hiring and an unemployment rate moving closer to full employment. Despite this improvement, the Fed continues to highlight wage inflation’s below-trend performance as evidence that labor market slack is still plentiful. While not currently problematic, Q2’s ECI performance will require the Fed to reassess its labor market and inflation assessment.
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Editors’ Picks
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Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.