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October 31, 2006
Compensation Costs Rise at Fastest Clip in 2 Years

The Employment Cost Index (ECI) rose 1.0 percent last quarter, which was higher than the 0.9 percent increase in the previous quarter and the biggest increase in two years, Reuters reports.

The ECI measures quarterly changes in compensation costs, which include wages, salaries, and employer costs for employee benefits for civilian workers (private industry and state and local government).

Total compensation costs for the private sector rose 0.9 percent from June to September, after advancing 0.8 percent in the previous quarter, according to the Department of Labor's Bureau of Labor Statistics.

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.

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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.

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.

Private sector benefit costs rose 1.0 percent for the September quarter, following a 0.7 percent gain in the previous quarter.

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

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.

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.

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