April 30, 2021

The employment cost index for civilian workers climbed at a 3.7% rate in the first quarter after having risen 2.8% in the fourth quarter.   Over the course of the past year it has risen 2.6%.  The increase was led by the wage component.

With the unemployment rate currently at 6.0% and full employment presumably about 4.0%, one would think that there is not going to be upward pressure on wages caused by a tight labor market.  However, at least some workers are choosing not to return to work because of generous state and Federal unemployment benefits.  As a result, an increasing number of firms — restaurants and bars in particular — are indicating that they are having to boost wages to get enough bodies to re-open.

Wages climbed at a 4.0% rate in the first quarter after having risen 3.4% in the fourth quarter..  Wages  and have risen 2.7% in the past year which is roughly in line with the past couple of years.  The question is whether the gains in the third and the fourth quarters represent the beginning of an uptrend.  Only time will tell.

Benefits climbed at a 2.7% rate in the first quarter compared to a 2.5% pace in the fourth quarter.  Over the past year benefits have risen 2.5%.

Stephen Slifer

NumberNomics

Charleston, SC