April 30, 2024

The employment cost index for civilian workers climbed at a 4.7% annual rate after gaining 3.7% in the fourth quarter.    Over the course of the past year it has risen 4.2%.

With the unemployment rate currently at 3.8% and full employment presumably about 4.0%, upward pressure on wages and benefits should continue  because of the tight labor market. Many firms are still boosting  compensation to get enough bodies to boost production.  The intense upward pressure on wages caused by the extreme labor shortage following the 2020 recession has abated.  Hopefully, the addition of large numbers of illegal immigrants will keep wage pressures in check.

Wages climbed at a  4.4% annual rate in the first quarter after rising 4.2% in the fourth quarter.  Wages have risen 4.3% in the past year which remains rapid and steady..

Benefits climbed at 4.4% pace in the first quarter after gaining 3.0% in the fourth quarter.  Over the past year benefits have risen 3.8%.  The growth in benefits remains rapid and relatively steady..

Labor costs have risen 4.2% in the past year.  However, real wages declined for two years as inflation rose more quickly than wages.  As a result, workers in general, as well as unions, will continue to seek sizable wage gains in the quarters ahead to make up for some of the drop in real wages..  A 4.2%  increase in wages is inconsistent with the desired 2.0% inflation rate.

Stephen Slifer


Charleston, SC