Employment Costs Moderate

By John S. McClenahen The employment cost index for U.S. civilian workers (ECI) -- a figure that factors in both wages and benefits -- increased 0.9% on a seasonally adjusted basis during the second quarter of this year, a bit less than the 1.1% increase during the first quarter of 2004, the U.S. Labor Department reported on July 29. During the second quarter, wages and salaries rose 0.6% -- the same as in the first quarter -- while benefits increased 1.8%, down from 2.4% during the first quarter. Within the manufacturing sector of the U.S. economy, total compensation costs increased 0.8% during the second quarter of this year on a seasonally adjusted basis, about one-third of the 2.3% increase in the first quarter. Wages and salaries increased 0.7% during the second quarter, the same as in the first quarter, as the rate of increase for benefits dropped dramatically to 1.4% from 5.1% during the first quarter. "The tepid gain for the ECI is good news for the Fed and the financial markets, as employment costs, the single largest cost of doing business, remain well contained," judges Merrill Lynch & Co., New York. "This should allow the Fed to move [the money supply] at its 'measured' pace."

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