ICS Commentary - U.S. Employment Cost Index, Q2 2012

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Consistent with a continued weak labor market, the 12-month growth rate of employee pay and benefits slowed further this quarter. Employees cost their employers just 1.7 percent more than they did 12 months ago, according to the new Employment Cost Index (ECI) released July 31st by the U.S. Bureau of Labor Statistics.

"Underpinning the lower compensation inflation rate was a precipitous drop in the ECI for benefits," noted Linda Barrington, Managing Director of Cornell's Institute for Compensation Studies in the ILR School. "The year-on-year benefits growth rate in the private sector hasn't been this low since in two years.We are not seeing recovery pressures having a real impact on the labor market."

Even more striking, according to Barrington, is the trend in the 12-month percent change in what employers pay for worker health benefits. "We're used to hearing complaints of geometric increases in the cost burdens that employers bare for employee health benefits, but that hasn't been the trend since 2002. Inflation in these costs has been slowing." This quarter reported another record low for the health benefits cost index.

The Employment Cost Index released July 31st by the U.S. Bureau of Labor Statistics is one of the labor market indicators used by the Federal Reserve Board to monitor the effects of fiscal and monetary policies and is released quarterly.

Read full ICS Commentary on Employment Cost Index. (pdf)