Preview: Due April 30 - U.S. Q1 Employment Cost Index - Slightly stronger on the quarter, but slower yr/yr
We look for the Q1 employment cost index (ECI) to increase by 0.8%, slightly firmer than the 0.7% seen in Q4 that was the slowest since Q2 2021 but still seeing the yr/yr pace slow to 3.2% from 3.4%, reaching its slowest since Q2 2021.
We expect a 0.8% increase in wages and salaries, slightly stronger than a 0.7% gain seen in Q4 that underperformed the signals from payroll average hourly earnings, though trend in both series continues to gradually slow.
There is some upside risk to benefit costs from rising health premiums, with Q1 often seeing volatility in this series, with Q1 2025 having seen an above trend 1.2% increase. For Q1 2026 however we expect only a modest pick up to 0.8% from 0.7% in Q4.
The strong Q1 2025 rise in benefit costs will see yr/yr growth slipping to 3.2% from 3.4%, still above the pre-pandemic trend that was slightly below 3.0%. We expect wages and salaries to edge up to 3.4% from 3.3% but benefits to slow to 3.0% from 3.4%.
