U.S. First-Quarter Employment Costs Rise 0.7%, as Forecast

(Bloomberg) -- U.S. employment costs and wages held up at a steady pace in the first quarter, signaling some buildup of inflationary pressures that could still spur pickups in otherwise-muted price gauges.

The employment cost index, a broad measure monitored by the Federal Reserve, increased 0.7 percent in the January-to-March period from the prior quarter, according to Labor Department data Tuesday that matched economist estimates and the prior quarter. The gauge increased 2.8 percent from a year earlier, slower than the fourth quarter’s pace but slightly above the year earlier rate.

Key Insights

  • The report signals a tight labor market is prompting employers to continue raising pay and benefits. The gains also show that inflation, which has been relatively contained in this economic expansion, has maintained momentum.
  • The data come just before the government’s monthly employment report due Friday, which is forecast to show average hourly earnings accelerated to a 3.3 percent annual pace of gains in April, one of the strongest rates of the current economic expansion.
  • The reading is not likely to sway Fed policy makers meeting this week. Central bankers have promised to be patient on interest-rate changes amid conflicting economic signals.

What Bloomberg’s Economists Say

“This is a compelling signal that employers’ labor costs are increasing. And barring a substantial pickup in capital investment and productivity, price pressures will be passed along the supply chain -- either eating into margins or being passed along to consumers.”
-- Carl Riccadonna, chief U.S. economist 
Click here for the full note.

Get More

  • Wages and salaries for private workers rose 3 percent from a year earlier, about in line with the prior four quarters.
  • Among occupational groups with larger gains for employment costs, including wages and benefits, were transportation and material moving, which increased 1.2 percent from the prior quarter, and construction, which rose 0.8 percent.
  • The government’s quarterly ECI reading covers employer-paid taxes such as Social Security and Medicare in addition to the cost of wages and benefits.
  • The Labor Department on Tuesday corrected the Employment Cost Index report released earlier the same day, reissuing it to show correct seasonally adjusted data for previous quarters.

©2019 Bloomberg L.P.