One of the data releases that has gained more attention recently than what it has historically received is the quarterly Employment Cost Index (ECI). With focus moving to not just job growth, but wage growth as well, the ECI index is a data point that Fed watchers are watching to guess what the Fed’s next move is going to be. Unfortunately for those that were wanting a September lift-off, the ECI thoroughly underwhelmed during the second quarter.
The ECI total compensation index rose just 0.16% quarter-over-quarter in the second quarter, consensus expectations were for a 0.6% gain. According to Econoday, this is the lowest gain in the 33-year history of the report. The year-over-year gain is just 2% and dropped from 2.6% in the 1st quarter. As the chart below shows, most likely, we will see average hourly earnings continue on a 2% annualized rate when the employment report comes out next week.