U.S. Q1 Employment Cost Index - Acceleration will add to Fed concerns on inflation
The Q1 Employment Cost Index with a 1.2% increase is stronger than expected and like Q1 inflation data, breaks a trend of gradual slowing seen in late 2023 to produce a renewed acceleration, rising by its most since Q1 2023.
The data will add to Fed inflationary concerns as its starts its meeting. Given the matching rise in Q1 2023, yr/yr data is unchanged at 4.2%.
On the quarter, despite the overall 1.2% increase, both wages and salaries and benefits rose by 1.1%, in the case of wages and salaries the third straight such increase. The labor market may need to lose momentum if wages and salaries are to do so, though other wage indicators have been less stubborn.
Benefits accelerated from a 0.7% increase in Q4. Q1 is a volatile quarter for benefits as health premiums are updated in this quarter, and the yr/yr data shows that Q1 2023 was strong too.
This suggest upcoming quarters will see slower gains in benefit costs.
