Howestreet.com - the source for market opinions

ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

April 27, 2018 | Wages and benefits Surged 0.8 Percent in the First Quarter, Most in a Decade

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Employment costs are on the rise. Wages rose 0.9% and benefits rose 0.7% in the first quarter.

The BLS Employment Cost Index shows a jump in wages and benefits in the first quarter.

  • Compensation costs for civilian workers increased 0.8 percent.
  • Wages and salaries (which make up about 70 percent of compensation costs) increased 0.9 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.7 percent.

Year-Over-Year ECI

Civilian Workers

  • Compensation costs for civilian workers increased 2.7 percent for the 12-month period ending in March 2018 compared with a compensation costs increase of 2.4 percent in March 2017.
  • Wages and salaries increased 2.7 percent for the 12-month period ending in March 2018 and increased 2.5 percent for the 12-month period ending in March 2017.
  • Benefit costs increased 2.6 percent for the 12-month period ending in March 2018. In March 2017, the increase was 2.2 percent.

Private Industry Workers

  • Compensation costs for private industry workers increased 2.8 percent over the year, a larger increase than the 2.3-percent increase in March 2017.
  • Wages and salaries increased 2.9 percent for the current 12-month period and increased 2.6 percent in March 2017.
  • The cost of benefits rose 2.5 percent for the 12-month period ending in March 2018 and increased 1.9 percent in March 2017.

Health Benefits

​Employer costs for health benefits increased 1.5 percent for the 12-month period ending in March 2018.

Wages and benefits may be rising but unless health care costs are up only 1.5% in the past year, employees are getting hit with increased medical costs.

Factors

Bloomberg discusses factors in its report U.S. Private-Sector Wages Lodge Biggest Gain Since 2008.

The latest ECI figures may have also been influenced by several factors. The gauge of employer costs in the first quarter is prone to surprises as it includes year-end bonuses, and the volatility may have been magnified this time by one-time payouts made by companies in response to the Republican-backed tax cuts enacted in December.

Average hourly earnings, a separate monthly measure of private- sector wages that can be influenced by shifts in industry employment and hours worked, has only gradually increased. Growth in worker pay has been slow to accelerate even as the unemployment rate has fallen to the lowest level since 2000.

Bloomberg posted the above chart. It shows year-over-year seasonally adjusted changes.

Generally, year-over-year charts are not seasonally adjusted. Fred does not have the unadjusted data.

Consumer Spending Weakens

Despite the surge in wages and benefits, consumer spending on goods declined 1.1% in the first quarter.

Mike “Mish” Shedlock

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the HoweStreet.com Weekly Recap.

April 27th, 2018

Posted In: Mish Talk

Post a Comment:

Your email address will not be published. Required fields are marked *

All Comments are moderated before appearing on the site

*
*

This site uses Akismet to reduce spam. Learn how your comment data is processed.