Employment cost inflation was stable last quarter:
Benefits costs increased more than wages--nothing new there. The big picture is that employment costs are growing at a fairly stable rate. We'll get productivity data soon, which will allow us to see how the labor cost of output is changing.
Remember that the employment cost index is adjusted for changes in the mix of workers. To look at the total pool of employees, focus on average hourly earnings. Last quarter, their inflation rates were identical, indicating that changes in the mix of employees had no impact on labor costs.
Business Strategy Implications: The tight labor market has not translated into accelerating labor costs, but it still makes sense to focus on the cheap steps: higher employee retention. (Don't forget our 7 Steps to Better Employee Retention.)