Tag Archives: Employment Costs

Personal Income, Employment Cost and Implications for Inflation

Monday morning, Rosenberg, in his eponymously named economic commentary “Breakfast with Dave”, continues to point out that deflation is a bigger risk currently than inflation. He states,

There is no more significant source of inflation than the U.S. labour market and we found out on Friday that total employment costs slowed to just +0.4% in Q3 and the YoY trend is extremely tame, at +1.9%. Wages came in at +0.3% sequentially and just +1.5% on a YoY basis.

By examining today’s Personal Income and Outlays data and Friday’s Employment Compensation data (cited by Rosenberg) let’s see what they are indicating about inflation.

First of quick summary of the two reports; As of Q3’10, quarter over quarter growth rate in Employment Compensation has slowed to .4% from .5% and .6% in the prior two quarters. Consensus for Q3 was .5%. Wages and Salary quarter over quarter % change was .45%. It has remained in a tight range, from .36%-.45% from the past 5 quarters. There continues to be no strong rebound in wage increases with employment costs remaining under 2% year over year.


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Friday’s Economic Data: Green Light for QE2

There was no shortage of economic data released today however there were no major moves in the indices as everyone seems to be waiting for the Fed’s announcement next Wednesday. Released today were GDP, Employment Cost Index, Consumer Sentiment and Chicago PMI. Let’s have a look in that order.


GDP came in at 2.0% growth quarter over quarter (SAAR) which was in line with expectations. Personal consumption showed surprising strength, contributing 1.8% to growth with change in inventory levels also contributing 1.4%. Inventory restocking continues to be a strong contributor to GDP growth since late 2009 and it remains to be seen how long this will last. GDP growth continues, albeit at a rate slower than typical recoveries. For further reading on what the Consumer Metrics Growth Index says about Q4 GDP, see here.

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