The
Employment Cost Index (ECI) is a quarterly economic series detailing the changes in the costs of labor for businesses in the
United StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
economy. The ECI is prepared by the
Bureau of Labor StatisticsThe Bureau of Labor Statistics , a unit of the United States Department of Labor, is the principal fact-finding agency for the U.S. government in the broad field of labor economics and statistics. The BLS is an independent national statistical agency that collects, processes, analyzes, and...
(BLS), in the U.S. Department of Labor.
It is a widely watched series by the financial sector, yet the ECI gets less press coverage than the more commonly quoted
Consumer Price IndexA consumer price index is a measure estimating the average price of consumer goods and services purchased by households. A consumer price index measures a price change for a constant market basket of goods and services from one period to the next within the same area...
(CPI)], which is also prepared by the BLS.
Discussion
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The
Employment Cost Index (ECI) is a quarterly economic series detailing the changes in the costs of labor for businesses in the
United StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
economy. The ECI is prepared by the
Bureau of Labor StatisticsThe Bureau of Labor Statistics , a unit of the United States Department of Labor, is the principal fact-finding agency for the U.S. government in the broad field of labor economics and statistics. The BLS is an independent national statistical agency that collects, processes, analyzes, and...
(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 IndexA consumer price index is a measure estimating the average price of consumer goods and services purchased by households. A consumer price index measures a price change for a constant market basket of goods and services from one period to the next within the same area...
(CPI)], which is also prepared by the BLS. While the CPI is a measure of
inflationIn economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also an erosion in the purchasing power of money – a loss of real...
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 GreenspanAlan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...
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.