Employment Costs Up 1% in Third Quarter

Posted by Tom Hanna on November 01st 2006 to Economic Indicators

Seasonally adjusted total compensation costs for employees increased 1% in the civilian labor force, 0.9% in the private sector and 1.4% for state and local government workers, during the third quarter with benefits costs accounting for one-third of the increase, according to the Employment Cost Index released Tuesday by the Bureau of Labor Statistics. Wages and salaries rose 0.9% while benefits costs rose 1.1%. For state and local government workers health insurance cost increases alone accounted for 1/4 of the total compensation cost increase.

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EMPLOYMENT COST INDEX-SEPTEMBER 2006

Total compensation costs for civilian workers increased 1.0 percent from June
to September 2006, seasonally adjusted, virtually unchanged from the 0.9 percent gain
from March to June, the Bureau of Labor Statistics of the U.S. Department of Labor
reported today. Benefit costs between June and September rose 1.1 percent, compared
with the gain of 0.8 percent from the previous quarter. Wages and salaries increased
0.9 percent during the quarter, unchanged from the gain of the previous quarter.
The Employment Cost Index (ECI), a component of the National Compensation Survey, measures quarterly changes in compensation costs, which include wages, salaries, and employer
costs for employee benefits for civilian workers (nonfarm private industry and state and
local government).

Increases in benefit costs accounted for one-third of the rise in compensation costs
for civilian workers from June to September 2006. Among private industry workers, benefit
costs attributed about one-fourth of the compensation gains during the quarter.
Among state and local government workers, benefit costs comprised approximately two-fifths
of the compensation cost gains during the June to September quarter. Health insurance
costs and defined benefit contributions represented over one-quarter of the gain in
compensation costs for state and local government workers from June to September 2006.

Quarterly changes, seasonally adjusted

Compensation costs for the private sector rose 0.9 percent from June to September, after
advancing 0.8 percent in the prior quarter. For state and local government workers,
compensation costs increased 1.4 percent from June to September, after increasing
1.1 percent for the quarter ended in June. (See tables A and 1.)

Wages and salaries of civilian workers increased 0.9 percent during the September
quarter, unchanged from the gain of the June quarter. Wages and salaries for private
industry workers rose 0.8 percent for the September quarter, compared with an increase of
0.9 percent in the prior quarter. Wages and salaries in state and local government
advanced 1.4 percent during the June to September period, higher than the 0.9 percent
gain in the prior quarter. (See tables A and 2.)

Benefit costs advanced 1.1 percent for civilian workers in the September
quarter, compared with a 0.8 percent gain in the June quarter. Private sector benefit
costs rose 1.0 percent for the September quarter, following a 0.7 percent gain in the
previous quarter. Benefit costs for state and local government workers increased 1.5
percent in the September quarter, unchanged from the gain in June. (See tables A and 3.)

Table A. 3-month percent changes in the Employment Cost Index, seasonally adjusted
Dec. Mar. June Sep. Dec. Mar. June Sep.
Compensation component 2004 2005 2005 2005 2005 2006 2006 2006
Civilian workers
Compensation costs 0.7 0.9 0.7 0.8 0.8 0.6 0.9 1.0
Wages and salaries 0.5 0.7 0.6 0.6 0.7 0.7 0.9 0.9
Benefit costs 1.3 1.6 0.9 1.1 0.9 0.5 0.8 1.1
Private industry
Compensation costs 0.7 0.9 0.6 0.7 0.7 0.6 0.8 0.9
Wages and salaries 0.4 0.7 0.5 0.6 0.6 0.7 0.9 0.8
Benefit costs 1.2 1.5 0.8 0.9 0.7 0.4 0.7 1.0
State and local government
Compensation costs 0.8 1.0 0.9 1.0 1.1 0.5 1.1 1.4
Wages and salaries 0.5 0.7 0.6 0.7 1.0 0.4 0.9 1.4
Benefit costs 1.5 1.6 1.4 1.6 1.5 0.7 1.5 1.5

Over-the-year changes, not seasonally adjusted

Annual compensation costs for civilian workers increased 3.3 percent for the year
ended September 2006, compared with a 3.0 percent over-the-year increase for
September 2005. Compensation costs in private industry rose 3.0 percent in the year ended
September 2006, compared with a 2.9 percent increase in September 2005. For state and
local governments, compensation costs increased 4.1 percent for the year ended
September 2006, compared with the over-the-year gain of 3.9 percent in September 2005.
(See tables B, 4, 5, and 7.)

Table B. 12-month percent changes in the Employment Cost Index, not seasonally adjusted
Sep. Sep. Sep. Sep. Sep. Sep.
Compensation component 2001 2002 2003 2004 2005 2006
Civilian workers
Compensation costs 4.1 3.5 3.9 3.8 3.0 3.3
Wages and salaries 3.6 3.1 2.9 2.5 2.3 3.2
Benefit costs 5.1 4.5 6.3 6.6 5.0 3.3
Private industry
Compensation costs 4.0 3.5 3.9 3.8 2.9 3.0
Wages and salaries 3.5 3.1 3.0 2.6 2.3 3.0
Benefit costs 4.9 4.3 6.3 6.7 4.5 2.8
State and local government government
Compensation costs 4.4 3.7 3.7 3.4 3.9 4.1
Wages and salaries 3.9 3.0 2.4 2.1 2.6 3.7
Benefit costs 5.6 5.3 6.7 6.5 6.5 5.2

The components of compensation differed in their rates of change. While increases in
wages and salaries became greater, the sharp increases in benefit costs seen for civilian
and private industry workers over the past several years slowed to a more moderate pace. For
civilian workers, wages and salaries rose 3.2 percent in the year ended September 2006, greater
than the gain of 2.3 percent in September 2005 and 2.5 percent in September 2004. Benefit
costs gained 3.3 percent for civilian workers for the year ended September 2006, slowing
significantly from increases of 5.0 percent for the year ended September 2005 and 6.6 percent
for the year ended September 2004. (See tables B, 8, and 12.)

Nonfarm private industry

For the year ended September 2006, compensation costs increased 2.2 percent for
goods-pro

ducing industries, slowing from the increase of 3.4 percent for the year ended
September 2005. The rise in compensation costs for manufacturing moderated for the year ending September 2006, advancing 1.6 percent compared with the 3.2 percent gain in September 2005. Compensation costs for construction rose 3.3 percent in September 2006, the same rate of increase as in September 2005. (See table 5.)

The over-the-year increase for September 2006 in compensation for service-providing
industries was 3.2 percent, compared with the 2.8 percent gain for the year ended
September 2005. Among service-providing supersector industries, compensation gains ranged
from 2.8 percent in the leisure and hospitality industry to 3.9 percent in education and
health services. For the year ended September 2006, compensation costs jumped 10.7 percent
in the utilities industry sector, higher than the increase of 4.5 percent for the year
ended September 2005. In contrast, compensation costs slowed sharply for the real estate
and rental and leasing sector, increasing 1.6 percent for September 2006 compared with
a jump of 8.0 percent for the year ended September 2005. (See table 5.)

Among white-collar occupational groups, over-the-year compensation cost gains for the
year ended September 2006 ranged from 2.5 percent for sales and related workers, to 3.6 percent for professional and related employees. Among blue-collar occupational groups, compensation cost changes ranged from 2.0 percent for production workers to 3.6 percent for construction and extraction workers. Compensation costs for service workers gained 2.8 percent for the year ended September 2006. (See table 5.)

Compensation costs for union workers advanced 2.8 percent over the year ended
September 2006, compared with 3.0 percent for the year ended September 2005. For nonunion workers, compensation costs rose 3.1 percent for the year ended September 2006, compared with a gain of 2.9 percent in September 2005. Wages and salaries for nonunion workers rose 3.2 percent for the 12 months ended in September 2006, compared with the over-the-year increase of 2.2 percent for union workers. Benefit costs for union workers rose 3.6 percent, compared with the 2.7 percent gain for nonunion workers in September 2006.
(See tables C, 6, 10, and 12.)

Table C. 12-month percent changes in the Employment Cost Index, private industry workers,
by bargaining status, not seasonally adjusted
Sep. Sep. Sep. Sep. Sep. Sep.
Compensation component 2001 2002 2003 2004 2005 2006
Union workers
Compensation costs 3.3 4.5 4.7 5.6 3.0 2.8
Wages and salaries 3.5 4.1 2.7 2.9 2.5 2.2
Benefit costs 3.1 5.1 8.3 10.1 4.0 3.6
Nonunion workers
Compensation costs 4.1 3.2 3.9 3.4 2.9 3.1
Wages and salaries 3.5 3.0 3.2 2.5 2.3 3.2
Benefit costs 5.4 4.0 5.9 5.9 4.6 2.7

State and local government

Wages and salaries for state and local government workers rose 3.7 percent in the year
ended September 2006, greater than the gain of 2.6 percent for the year ended September 2005.
Benefit costs rose 5.2 percent for the year ended September 2006, moderating from the
gain of 6.5 percent for the year ended September 2005. (See tables B, 11, and 12.)

For the year ended September 2006, compensation costs increased 5.6 percent for the
health care and social assistance industry, significantly higher than the 3.3 percent
increase for the year ended September 2005. Compensation costs for elementary and secondary schools rose 4.9 percent, compared with an increase of 3.7 percent for the year ended
September 2005. Among occupational groups, compensation costs for professional and related
workers rose 4.6 percent, for office and administrative support workers, 4.3 percent, and
for service workers, 4.0 percent for the year ended September 2006. (See table 7.)

Over-the-year changes in wages and salaries, constant dollars, not seasonally adjusted

Annual changes are computed in terms of December 2005 dollars to give an approximate
measure of changes in wages and salaries after adjustment for the changes over the same
time in the price of consumer goods and services. These estimates, in “constant dollars,”
show that wages and salaries for civilian workers rose 1.1 percent for the year ended
September 2006; a 3.2 percent gain in nominal wages and salaries for the year ended
September 2006 was offset by an increase of 2.1 percent in the Consumer Price Index for
the same time period. Wages and salaries for civilian workers declined 2.3 percent for the
year ended September 2005. Wages and salaries in private industry rose 1.0 percent in the
year ended September 2006, compared with a decline of 2.3 percent in September 2005. Wages and salaries increased 1.6 percent for state and local government workers for the year
ended September 2006, compared with an over-the-year decrease of 2.0 percent in
September 2005. These inflation-adjusted ECI series were derived using the Consumer
Price Index for All Urban Consumers (CPI-U), U.S. City Average All Items.
(See table D, the Technical Note, and the Constant Dollar historical listing at
http://www.bls.gov/web/ecconst.pdf, for details.)

Table D. 12-month percent changes in wages and salaries, Employment Cost Index,
constant dollars, not seasonally adjusted
Sep. Sep. Sep. Sep. Sep. Sep.
Sector, occupational group and industry 2001 2002 2003 2004 2005 2006
Civilian workers 0.9 1.5 0.6 0.0 -2.3 1.1
Occupation
Management, professional, and related 1.3 1.5 0.8 -0.1 -2.2 1.5
Sales and office -0.2 1.9 0.8 0.4 -2.4 1.0
Natural resources, construction, and
maintenance 1.2 1.3 0.3 -0.2 -2.1 1.3
Production, transportation, and
material moving 1.1 1.4 0.2 0.0 -2.5 0.2
Service 0.7 1.5 0.0 -0.6 -2.1 0.6
Industry
Goods producing 0.7 1.3 0.6 0.3 -2.3 0.7
Service providing 1.0 1.6 0.6 -0.1 -2.3 1.2
Private industry 0.9 1.5 0.8 0.0 -2.3 1.0
State and local government 1.2 1.5 0.1 -0.5 -2.0 1.6