Employment Cost Index

Employment Cost Index

The Employment Cost Index (ECI) is a quarterly economic series detailing the changes in the costs of labor for businesses in the United States economy. The ECI is prepared by the Bureau of Labor Statistics (BLS), in the U.S. Department of Labor.

Applications

It is a widely watched series by the financial sector, yet the ECI gets less press coverage than the more commonly quoted Consumer Price Index (CPI)] , which is also prepared by the BLS. While the CPI is a measure of inflation in consumer prices, the ECI is vital in that it gives an indication of whether employment cost changes are rising or falling, thus measuring inflation of wages, and employer-paid benefits. Former Chairman of the Federal Reserve Alan Greenspan said of the ECI, "The Employment Cost Index is indispensable to understanding America's economy. It ensures the accuracy of the statistics on employers' compensation costs that we rely on for economic policy making and for successful business planning." In making decisions to adjust the prime interest rate, the Federal Reserve often cites shifts in the ECI as having an effect on their decision-making process.


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