US: Private sector compensation costs accelerate - Wells Fargo

Matching the fastest annual pace since 2008, total employment costs continued its accelerating trend as 2017 came to an end, explained analyst at Wells Fargo. They see that tight labor market continues to suggest further strengthening for the coming year.

Key Quotes: 

“A favorite measure of the Federal Reserve on gauging compensation trends, the Employment Cost Index (ECI) matched expectations rising 0.6 percent sequentially in Q4 2017.”

“Cost strength was particularly noticeable in the private sector, where wages & salaries increased at a 2.8 percent yr/yr pace– matching the fastest annual pace in this cycle. Several sectors are now beginning to run at annual rates of 3.0 percent or more.”

“While wage increases have been generally modest and in line with inflation and productivity growth, the Q4 ECI report suggests a sustainable change in trend may be in play. Looking at the fundamental drivers of ECI and AHE, we expect to see wages and total compensation costs to continue to pick up in 2018.”