What is the Employment Cost Index?
The Employment Cost Index measures the change in the hourly labor cost to employers, independent of the influence of employment shifts among occupations and industry categories. It comes from the National Compensation Survey and uses a modified Laspeyres index with fixed employment weights. It covers civilian workers in private industry and state and local government.
ECI uses fixed employment weights, while Employer Costs for Employee Compensation uses current employment weights, so BLS says year-to-year changes in the ECEC cost levels usually differ from those in the ECI. ECI costs reflect the pay period that includes the 12th of March, June, September and December.
Production facts:
- Publisher: U.S. Bureau of Labor Statistics
- Frequency: Quarterly
- Typical release time: 8:30 a.m. ET on scheduled date
- Primary metric: Compensation growth
- Market sensitivity: Very High
- Data type: Hard data
- Economic indicator type: Lagging
- Revision risk: Low
Key components to watch
The headline (Compensation growth) is the most widely quoted but rarely the most informative number. The components that follow reveal whether the headline result is broad-based or concentrated, improving or deteriorating, and consistent with prior trends.
- Wages and salaries
- Benefits
- Civilian workers
- Private industry workers
- State and local government workers
For any release with multiple components, the investor's task is not to memorize every number but to identify which components are most relevant to the current investment thesis and track those with the most care.
How to read the headline: actual versus expected
Markets react to the gap between the published Compensation growth and the consensus forecast, not to the level alone. A stronger-than-expected or weaker-than-expected result is defined against that forecast, so check what was expected before reading the number.
The Employment Cost Index carries low revision risk, so the figure published at release is the one to compare with the forecast and with the previous period.
Market impact by asset class
The Employment Cost Index primarily affects the following markets: Stocks, Treasuries, Fed funds futures, USD.
Stronger than expected result: In an inflation-elevated, tightening environment, a stronger result typically pressures interest-rate-sensitive assets and can strengthen the dollar. In a growth-slowing environment, a stronger result can be equity-supportive if it reduces recession fears.
Weaker than expected result: In a growth-concern environment, a weaker result may reinforce concerns about economic deceleration. If the Fed is watching this specific indicator for policy calibration, a persistent pattern of below-consensus results may shift the rate path.
In-line result: In-line results typically produce muted market reactions unless there are significant component deviations from expectations. The market had already priced the consensus, so confirmation requires little repricing.
Revision risk and methodology notes
The Employment Cost Index carries low revision risk. BLS considers ECI estimates final upon publication and does not revise them later. The exception is the 3-month seasonally adjusted series, which are revised every March release for the previous five years when annual seasonal factors are recalculated.
Primary source: U.S. Bureau of Labor Statistics: Employment Cost Index.
Publisher documents read for this page:
Common investor mistakes
- Reacting to the headline without checking the components. The headline can diverge significantly from the underlying trend revealed by the components. A headline beat driven by a volatile component may not indicate the same strength as a broad-based improvement.
- Ignoring revisions to prior periods. An initial strong number revised down in the following release tells a different story than a number that stands firm.
- Not knowing what is consensus-priced. Reacting to a number without knowing what was already expected conflates information with noise. The market reaction is driven by the deviation from expectations, not by the level of the number.
- Applying the same interpretation across different regimes. The same headline result has different implications depending on the Fed's current stance, the growth trend, and what is already priced into the yield curve and equity multiples.
Related releases
The Employment Cost Index should be read alongside:
- Employment Situation (Jobs Report)
- Nonfarm Payrolls
- Unemployment Rate
- Average Hourly Earnings
- Labor Force Participation Rate
Frequently asked questions
What is the Employment Cost Index?
The Employment Cost Index measures the change in the hourly labor cost to employers, independent of the influence of employment shifts among occupations and industry categories. It comes from the National Compensation Survey and uses a modified Laspeyres index with fixed employment weights. It covers civilian workers in private industry and state and local government. It is published quarterly by U.S. Bureau of Labor Statistics.
When is the Employment Cost Index released?
The Employment Cost Index is released by U.S. Bureau of Labor Statistics on a quarterly schedule: 8:30 a.m. ET on scheduled date. Exact dates are on the publisher's release calendar.
How does the Employment Cost Index affect markets?
The Employment Cost Index primarily affects Stocks, Treasuries, Fed funds futures, USD. Its typical market sensitivity is rated Very High. A result that comes in stronger than consensus expectations generally moves affected markets directionally, while a weaker result can have the opposite effect. The direction depends on the current macro regime and what is already priced into markets.
What is the revision risk for the Employment Cost Index?
The Employment Cost Index carries low revision risk. BLS considers ECI estimates final upon publication and does not revise them later. The exception is the 3-month seasonally adjusted series, which are revised every March release for the previous five years when annual seasonal factors are recalculated.