What is Employment Cost Index – ECI?
A quarterly report from the U.S. Department of Labor that measures the growth of employees’ compensation (wages and benefits). The index is based on a survey of employer payrolls in the final month of each quarter. The ECI tracks movement in the cost of labor, including wages, fringe benefits and bonuses for employees at all levels of a company. Read more for examples and further explanation including related video clips and also comments
Example explains Employment Cost Index – ECI
The idea behind analyzing ECI is that as wage pressures increase, so does inflation because compensation tends to increase before companies increase prices for consumers. Thus, it is considered inflationary when the ECI has an increasing trend or exhibits a jump that is higher than expected for a given period. In addition, as inflation increases, yields and interest rates also rise, resulting in a decrease in bond prices.
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