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Analysts at Nomura point out that the Q2 employment cost index (ECI) of US showed modest upward pressure on employment costs as compensation increased 0.6% q-o-q, in line with their expectations but slightly below consensus (Nomura: 0.6%, Consensus: 0.7%).

Key Quotes

“The Q2 report supports the view that the Q1 increase of 0.8% was likely unsustainable. On a 12-month basis, ECI compensation increased 2.8% y-o-y, up 0.1pp.”

“Looking at the details, the wages and salaries component, accounting for roughly 70% of total compensation, rose only 0.5% q-o-q, below our expectation of a 0.6% increase, but a still-healthy reading nonetheless. Benefits, on the other hand, surprised to the upside with a 0.9% q-o-q increase (2.9% y-o-y).”

“Relative to Q1, wage and salary growth for private service-providing workers slowed to a 0.5% q-o-q increase from 1.1% previously while goods-producing industries showed a more modest deceleration from 0.85% in Q1 to 0.7% in Q2.”

“More broadly; on a y-o-y basis, 2.9% growth in wages and salaries for private industry workers, as measured by the ECI, sits roughly 0.2pp above the average hourly earnings (AHE) counterpart from the monthly BLS employment report, at 2.7%.”