U.S. employment cost index rises in Q1 2019, pace of wage inflation likely to pick up gradually

The U.S. employment cost index rose in the first quarter. On a quarter-on-quarter basis, the ECI rose 0.7 percent, consistent with consensus expectations. Both wages and salaries and benefits rose at a similar pace. The split by public and private sector also indicated a uniform rate of rise. On a year-on-year basis, the employment cost index dropped 2.8 percent, but continues to be within the range of strong, but not spectacular.

Since the start of 2016, the ECI measure has been rising steadily, but the trend continues to be modest compared with its pre-crisis history – especially in light of how fast the jobless rate has fallen and the continued rise in employment.

“In our view, the pace of growth in wage inflation should continue to pick up gradually as the unemployment rate falls further and the slack in labor markets diminishes. The historical relationship between the unemployment rate and wage growth seems to have weakened somewhat during this business cycle, however, leading us to expect only measured incremental improvements in wage pressures even as we expect the unemployment rate to fall further below 4%”, said Barclays in a research report.

At 14:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -131.859 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex