US: Focus on Employment cost index ahead of NFP - Nomura

Analysts at Nomura are forecasting a 0.6% q-o-q increase in the US employment cost index (ECI) for compensation (2.43% y-o-y).

Key Quotes

“For wages and salaries, which make up roughly 70% of compensation, we expect a 0.7% q-o-q increase (2.5% y-o-y). Average hourly earnings increased notably in Q3 at a pace of 0.9% q-o-q (0.7% q-o-q for production & nonsupervisory workers). However, this acceleration only reversed the softness earlier this year, leaving the 12-month change (2.9%) at the level from December 2016.”

“Some of the transitory factors that boosted average hourly earnings growth in Q3 related to inclement weather are unlikely to affect the ECI due to differences in methodology. That said, we expect a modest increase in the ECI in Q3. Over the medium term, we still expect wage growth to remain subdued due to structural headwinds such as low job-to-job transition rates and reduced business dynamism.”