What is the Employment Cost Index?

The employment cost index is a quarterly report issued by the Department of Labor.  The report measures the growth of wages, salaries, and benefits costs over a certain period of time.  Though ECI figures are usually weeks old, the data remains the best indicator of employment price pressures considering it factors employees’ total compensation.

If wage pressures become evident, higher expectations of inflation also tend to arise.  However, increasing compensation does not necessarily lead to increased inflationary pressures.  Oftentimes, increased productivity enables employers to increase compensation without increasing the costs of their goods or services. It is important to note that no single economic indicator can consistently predict the future of the economy.  However, the employment cost index is a closely watched release.  Most of the recent Fed releases and speeches indicate inflation is a concern and market participants remain cautious.  Now is a good time to take advantage of mortgage interest rates at their current levels to avoid exposure to future market volatility.