For whatever it’s worth, the Fed’s preferred measure of labor costs in America rose more than expected in Q2.

As readers will kindly recall, the BLS’s Employment Cost Index was a top-tier release during the worst of the post-pandemic inflation shock. This was the series which motivated Jerome Powell’s initial hawkish pivot in late 2021, when the Fed jettisoned the “transitory” characterization of the price pressures building across the US economy.

The ECI doesn’t get anywhere near the media attention it did two or three years ago, but it’s still important as a comprehensive account of employee compensation.

With that preamble, the headline ECI print — the quarter-to-quarter change in the seasonally adjusted, all-civilian total comp metric — was warmer than expected in data released Thursday. Unrounded, the print for Q2 was 0.93934%, the briskest since Q1 of 2024.

The figure gives you some context for how quickly this measure was rising during the height of the inflation scare three years ago. That’s why the Fed was worried about a wage-price spiral, even as they assiduously avoided that terminology while speaking in public about the price formation process.

I won’t dwell too long on this update given the inflation worry in 2025 is on the goods side, and it’s tariff-related (so, conceptually different from services sector, demand-pull inflation), but I do want to highlight one more series from the release.

The figure below isolates wages and salaries for private sector employees, and measures against the same quarter a year ago.

As you can see, the annual growth rate on that series ticked up notably in Q2. It was only the second month-to-month increase in the 12-month rate since 2022.

To reiterate, none of this will raise eyebrows right now, but it’s well worth highlighting all the same.

The Fed, you’re reminded, likes the ECI measure because it’s considered relevant for core inflation given methodological adjustments which account for the shifting nature of the labor market.