Highlights
Wage inflation is not a concern. The fourth-quarter employee cost index rose only 0.5 percent vs. three prior quarters of 0.7 percent increases. The year-on-year rate of 2.6 percent is the lowest on record (1982). Increases in both wages and benefits were mild at 0.4 percent and 0.5 percent. Manufacturing jobs showed especially low rates of increase which is no surprise given the severity of contraction in the sector. Attention is not on wage pressures but on jobs and on the depth of the recession.

Market Consensus Before Announcement
The employment cost index for civilian workers remained mild in the third quarter, rising 0.7 percent in the third quarter, matching both the second and first quarters. Meanwhile, the year-on-year rate of 2.9 percent was down 2 tenths from the second quarter. With labor markets declining and with companies cutting benefits, employment costs are not a worry for the Fed in terms of inflation pressures. Indeed, a big chunk of the softness has been from employers passing along a bigger share of medical insurance costs on to employees. Benefit costs rose only 0.6 percent in the third quarter, with the year-on-year rate down 3 tenths to a very mild 2.6 percent. Wages & salaries rose 0.7 percent in the quarter for a 3.1 percent year-ago pace.

Employment cost index Consensus Forecast for Q4 08: +0.7 percent simple quarterly rate
Range: +0.4 to +0.9 percent simple quarterly rate

2009 Release Schedule

Released On: 1/30 4/30 7/31 10/30 Released For: Q4:08 Q1:09 Q2:09 Q3:09