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    US Employment Cost Index: Wage Gains Slow and May Help Reassure Federal Reserve


    The U.S. Bureau of Labor Statistics’ Employment Cost Index (ECI) is a key measure used by the Federal Reserve to track inflation and wage pressures.[0] The latest ECI, released Tuesday, showed that real wages and salaries declined 1.2% year-over-year in the three months ended in December. Once adjusted for inflation, wages and salaries decreased 1.2% over the year ending in December. This is a slight improvement from the 3% drop in the year ending in September.

    The ECI also found that wages and salaries for private-sector workers rose 1% in the October-December period, down from 1.2% in the third quarter.[1] Benefits increased 0.8%, down from 1% in the same period.[2]

    The report is unlikely to change the Fed’s plans to tighten credit further in the short term.[3] However, it may help reassure the Federal Reserve that wage gains won’t fuel higher inflation and that labor-cost pressures are easing in the parts of the economy where the Fed is most concerned about inflation.[4]

    University of Massachusetts economist Arin Dube noted that “new measure of wages in [the] core services sector shows rapid reduction in nominal wage growth, which is additionally shown to predict future dis-inflation.”[5]

    The Fed is widely expected to raise rates by a quarter of a percentage point Wednesday, which would mark its eighth consecutive increase and the smallest in almost a year.[6] It is expected that an additional quarter-point increase will occur in March, after which there will be a break before one or two reductions take place before the conclusion of the year.[2]

    0. “On The Money — Fed drives down wage growth” The Hill, 1 Feb. 2023,

    1. “Private-Sector Wage and Salary Increases Slightly Slow in 4th Quarter” SHRM, 31 Jan. 2023,

    2. “Important wage inflation measure for the Fed rose less than expected in Q4” CNBC, 31 Jan. 2023,

    3. “Worker pay, benefits see third straight slowdown”, 31 Jan. 2023,

    4. “US wage growth slowing after rapid gains” Greater Baton Rouge Business Report, 31 Jan. 2023,

    5. “White House drops new wage measurement as Fed ponders more rate hikes” msnNOW, 8 Feb. 2023,

    6. “Fed's Grip on Markets Thrusts Secondary Wage Data Into Spotlight By Bloomberg”, 31 Jan. 2023,

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