Econoday Report: Employment Cost Index 31, 2007

<%@ Language=VBScript %> Econoday Report: Employment Cost Index 31, 2007

Employment Cost Index

Definition
A measure of total employee compensation costs, including wages and salaries as well as benefits. The employment cost index (ECI) is the broadest measure of labor costs. Why Investors Care

Released on 7/31/07 For Q2 2007

ECI - Q/Q change
Actual	0.9%
Consensus	0.9%
Consensus Range	0.7% to 1.0%

ECI - Y/Y change
Actual	3.4%
Consensus	N/A

Highlights
The employment cost index rose an as-expected 0.9 percent in the second quarter for a year-on-year pace of 3.3 percent. These rates are moderate given the strengthening in GDP, at 3.4% in the second quarter as reported on Friday. Economic growth, and profit growth that goes with it, will help absorb increased labor costs.

But a jump in benefit costs, up 1.3 percent in the quarter for a 3.4 percent year-on-year rate, is definitely on the high side. The gain was fed by benefit increases from state and local governments which boosted retirement and health plans. But the 1.3 percent jump follows an unusually low 0.1 percent rise in the first quarter. Taken together, benefits are in line with wages & salaries, which rose 0.8 percent in the second quarter for a year-on-year pace of also 3.4 percent.

Financial markets showed little reaction to the data which were accompanied by another important inflation reading, a tame 0.1 percent rise in the core PCE price index for June. Today's inflation data are likely to give a boost to Treasuries and perhaps the stock market as well.

Market Consensus Before Announcement
The employment cost index for civilian rose a softer-than-expected 0.8 percent in the first quarter though the wage & salary component did show pressure, up 1.1 percent for the steepest gain in six years. The benefit reading, subdued by lower employer contributions to retirement plans, is the lowest in eight years. The Fed will be watching this release closely, given that labor markets remain tight. If the benefits component rebounds, the second quarter overall cost index could be quite strong.

Employment cost index Consensus Forecast for Q2 07: +0.9 percent simple quarterly rate
Range: +0.7 to +1.0 percent simple quarterly rate

Trends

The employment cost index measured total compensation costs which include wages and salaries and also benefits. Benefits include vacations, but the primary mover is health insurance premiums.

Data Source: Haver Analytics

2007 Release Schedule

Released On: 1/31 4/27 7/31 10/31

Released For: Q4 Q1 Q2 Q3