What is the Employment Cost Index trying to tell you?
Employment Cost Index
What is the Employment Cost Index?
The Employment Cost Index is a quarterly series that measures the growth of total employee compensation. Specifically, it looks at changes in wages, salaries, and employer costs for employee benefits. The wages portion looks at both salaried and hourly pay while benefits look at the combination of health insurance, retirement options, and paid time off. Data is broken down by industry, occupation, and union vs non-union workers. It is important to note that things like periodic bonuses and commission payments can create volatility in this index’ readings.
Why is the Employment Cost Index important?
From an employer standpoint the Employment Cost Index is useful for evaluating the labor market and determining quarterly raise opportunities and payscales. Economist and investors use the Employment Cost Index to track the health of the economy. For example, increases in compensation tend to point towards a strong and growing economy. Additionally, this index can provide inflationary insights. If employment costs are rising, other indicators would have shown rises as well, suggesting that a rise in inflation is inevitable.
What should you do?
If you’re looking for a better understanding of compensation trends and what they mean for the health of the economy, it is important to follow the Employment Cost Index. Majestic’s CORE Report follows the Employment Cost Index, along with other indicators every week to see where the market stands.
Source: TradingEconomics.com
