Employment Costs Maintain Trend in Q2

Wells Fargo Research Team Wells Fargo

Pulling back from the strongest sequential post-recession pace in Q1, employment costs rose by a more moderate 0.5 percent in Q2. Benefit costs outpaced wage & salaries on the quarter.

Compensation Costs Fail to Accelerate

While the pace of total compensation costs pulled back from its above trend quarterly pace in Q1, the year-over-year pace maintained its post-recession high in Q2 at 2.4 percent.
Costs for both wages & salaries and benefits rose at a slightly slower pace in Q2, though benefits growth held in at a firmer rate than wages over the past year. Benefits are running at a 2.5 percent year-ago pace, the strongest since Q1 2015.

Wage Pressures Remain Limited

Following a cycle-high annual pace of 2.6 percent, private sector wages & salaries pulled back a touch in Q2, to a 2.4 percent pace. Excluding incentive-paid occupations, private sector wages & salaries maintained its 2.6 percent year-over-year pace.
For the Fed, today's ECI report will suggest that compensation cost pressures remain tame despite the tightening labor market. Upward pressures should build, the question remains when.

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Wells Fargo Research Team

Wells Fargo

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