Wage inflation is very likely building based on the employment cost index which in the fourth quarter rose 0.6 percent for a second quarter in a row. Benefits rose 0.7 percent in the quarter which is a sizable increase for this component. The wages & salaries component also shows substantial pressure, up 0.6 on the quarter and reflecting strength in year-end bonuses.
Year-on-year, however, rates in this report have yet to build steam, at 2.0 percent for the second quarter in a row and down from 2.2 percent this time last year. Benefits are up only 1.7 percent on the year with wages & salaries up 2.1 percent.
For the hawks, who are always on the watch to head off inflationary flash points, this report is meaningful and will offer debate points for further rate hikes. For Fed policy in general, this report is positive and supports expectations that wage inflation will help offset continued commodity deflation.
Hanover Advisors Inc. issued this content on 29 January 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 29 January 2016 17:43:28 UTC
Original Document: http://www.hanoveradvisorsinc.com/employment-cost-index
