US employment cost index likely rose in second quarter on base effect

The employment cost index in the US might have risen 0.7 percent in the second quarter, one-tenth more rapid that the 0.6 percent rate witnessed in the first quarter, said Societe Generale in a research report. However, a reading consistent with the projection might push the annual rate to 2.5 percent from 1.9 percent, according to Societe Generale. This might match the highest rise in the Employment Cost Index since the fourth quarter of 2008.

But the rise is predominantly because of a base effect. ECI, in the second quarter of 2015 rose just 0.2 percent, which was the slowest quarterly increase since the series stared in 2001. The average hourly earnings in the second quarter were up 0.67 percent, which is similar to the first quarter’s 0.63 percent rise. This implies that private wages and salaries are likely to have risen 0.7 percent again, stated Societe Generale. In the meantime, the cost of benefits might have climbed 0.6 percent.