April 29, 2022
The employment cost index for civilian workers climbed at a 5.7% rate in the first quarter after rising at a 3.8% pace in the fourth quarter. Over the course of the past year it has risen 4.5%.
With the unemployment rate currently at 3.6% and full employment presumably about 4.0%, some upward pressure on wages and benefits has begun to emerge because of a very tight labor market. An increasing number of firms of all sorts are boosting compensation of all types to get enough bodies to boosts production.
Wages climbed at a 4.9% annual rate in the first quarter after rising 4.1% in the fourth quarter. Wages have risen 4.7% in the past year which is the fastest growth rate in 20 years. This faster rate of increase in wages should continue in the quarters ahead.
Benefits climbed at 7.3% annual rate in the first quarter after climbing at a 3.5% pace in the fourth quarter. Over the past year benefits have risen 4.0%.
While labor costs have risen 4.5% in the past year and are trending higher, they are still exceeded by inflation. The BLS reports that real wages have fallen 3.7% in that period of time. This will cause workers in general, as well as unions, to seek sizable wage gains in the quarters ahead which will, in turn, keep upward pressure on inflation.