US ECI to show a pickup in wage growth

The US Employment Cost Index is expected to register a 0.6% sequential increase in the first quarter, says Societe Generale. This is close to the gain reported in Q4 and appears benign on the surface; however, it will push the yoy growth rate from 2.3% to 2.6%, the strongest pace since 2008. 

The acceleration should be even more pronounced in the ECI wage & salary component forprivate sector workers which is expected to show a 0.7% sequential increase and a 2.8% yoy growth rate. 

This would be the first tangible sign of a pickup in wage growth. If the expectation comes to fruition, it would confirm the view the labor market is approaching an inflection pointand that wage growth could accelerate in a non-linear fashion as the unemployment rateapproaches NAIRU. 

While a pickup in wage growth is not a pre-condition for a rate hike by the Fed, it could nonetheless cause the market to reassess the likely timeframe.