September 2005 Employment Cost Index

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

Total compensation costs for civilian workers increased 0.8 percent from June to September 2005, seasonally adjusted, virtually unchanged from the 0.7 percent gain from March to June, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Benefit costs between June and September rose 1.3 percent and continued to outpace the gain in wages and salaries for civilian workers, 0.6 percent. The Employment Cost Index (ECI), a component of the National Compensation Survey, measures quarterly changes in compensation costs, which include wages, salaries, and employer costs for employee benefits for civilian workers (nonfarm private and State and local government).

Increases in benefit costs accounted for over 40 percent of the rise in compensation costs for civilian workers from June to September 2005. Among private industry workers, benefit costs contributed one-third of the compensation gains during the quarter. Among State and local government workers, benefit costs comprised over one-half of compensation cost gains during the June to September period. Health insurance costs and defined benefit contributions each represented approximately one-fifth of the gain in compensation costs for State and local government workers from June to September 2005.

Hurricanes Katrina and Rita struck the Gulf Coast during the reference period for the ECI, affecting the lives of millions of Americans and resulting in significant disruptions in business both inside and outside of the impacted areas. Survey response rates in the affected areas were lower than usual, but the data from nonresponding establishments account for less than 1 percent of the overall sample. There does not appear to have been any tangible effects on the estimates.

Quarterly changes, seasonally adjusted

Compensation costs for the private sector rose 0.8 percent from June to September 2005, compared with a gain of 0.6 percent in the prior quarter. For State and local government workers, compensation costs rose 1.1 percent in September, greater than the gain of 0.7 percent for the quarter ended in June. (See tables A and 1.)

Benefit costs rose 1.3 percent for both civilian and private industry workers in the September 2005 quarter, following more modest gains of 0.8 percent for both sectors in the June quarter. Benefit costs for State and local government workers increased 1.7 percent in the September quarter, compared with a 1.2 percent gain in the prior quarter.

Wages and salaries for both civilian and private industry workers increased 0.6 percent during the September 2005 quarter, the same increases as in the previous two quarters. Wages and salaries in State and local government advanced 0.7 percent during the June to September 2005 period, following an increase of 0.5 percent in the prior quarter.

Over-the-year changes, not seasonally adjusted

Annual compensation cost increases moderated for civilian and private industry workers for the year ended September 2005 compared with over-the-year increases for September 2004. Compensation costs for civilian workers increased 3.1 percent for the year ended September 2005, lower than the 3.8 percent over-the-year increase for September 2004. Compensation costs in private industry rose 3.0 percent in the year ended September 2005, slowing from a 3.7 percent increase in September 2004. Compensation costs increased 3.7 percent for State and local governments for the year ended September 2005, compared with an over-the-year gain of 3.4 percent in September 2004. (See tables B, 2, and 3.)

The components of compensation showed differences in the rate of change. While increases in wages and salaries continued at a moderate pace, the sharp increases in benefit costs over the past several years continued to moderate. For civilian workers, wages and salaries rose 2.3 percent in the year ended September 2005, nearly identical with a gain of 2.4 percent in September 2004. Benefit costs gained 5.1 percent for civilian workers for the period ended September 2005, slowing sharply from an increase of 6.8 percent for the year ended September 2004. (See tables B, 5, 6, and 8.)

Nonfarm private industry

For the year ended September 2005, compensation costs in private industry increased 3.7 percent for goods-producing industries, compared with an increase of 4.6 percent for the year ended September 2004. The rise in compensation costs for manufacturing moderated for the year ending September 2005, advancing 3.3 percent compared with the 5.0 percent gain in September 2004. Compensation costs for construction rose 3.5 percent in September 2005, compared with a 2.9 percent rise in September 2004. (See table 3.)

The over-the-year increase in compensation for service-producing industries was 2.6 percent, declining from the 3.5 percent gain for the year ended September 2004. Among service-producing industries, compensation gains in transportation and public utilities moderated for the year ending September 2005, rising 2.1 percent compared with an increase of 4.3 percent in September 2004. (See table 3.)

Over-the-year compensation cost increases were 3.2 percent for white-collar occupations, 2.7 percent for blue-collar occupations, and 2.4 percent for service occupations for the year ended September 2005. Among white-collar occupational groups, compensation cost changes ranged from 2.3 percent for sales workers to 3.5 percent for professional specialty and technical employees. Among blue-collar occupational groups, compensation cost increases ranged from 1.6 percent for machine operators, assemblers, and inspectors to 3.2 percent for precision production, craft, and repair occupations and transportation and material moving occupations. (See table 3.)

Compensation costs for union workers advanced 2.9 percent over the year ended September 2005, falling sharply from the 5.8 percent gain for the year ended September 2004. For nonunion workers, compensation costs rose 3.0 percent for the year ended September 2005, compared with a gain of 3.4 percent for September 2004. Benefit costs for union workers rose 4.1 percent for the year ended September 2005, decelerating sharply compared with the gain of 10.6 percent in September 2004. Benefit costs for nonunion workers advanced 5.0 percent over the year ended September 2005, compared with an increase of 5.9 percent in September 2004. Wages and salaries for union workers rose 2.1 percent for the 12 months ended in September 2005, nearly identical to the over-the-year increase of 2.2 percent for nonunion workers. (See tables C, 4, 7, and 8.)

Among blue-collar workers, compensation costs advanced 3.0 percent for union workers, compared with the gain of 2.6 percent for nonunion workers for the 12 months ended in September 2005. In manufacturing industries, compensation cost gains for union workers decelerated sharply, rising 2.4 percent for the year ended September 2005, significantly less than the 8.1 percent increase for the year-ended September 2004. For nonunion workers in manufacturing, compensation costs rose 3.6 percent for the year ended September 2005, compared with an over-the year gain of 4.1 percent in September 2004. (See table 4.)

Among the four geographic regions, increases in compensation costs ranged from 2.7 percent in the South to 3.3 percent in the West for the year ended September 2005. Compensation costs rose 3.0 percent in the Northeast and Midwest. In the West, gains in wages and salaries slowed to 1.8 percent for the year ended September 2005, compared with the 2.7 percent gain for the year ended September 2004. Among the remaining regions, wages and salaries rose 2.1 percent in the South, 2.2 percent in the Northeast, and 2.6 percent in the Midwest for the year ended September 2005. (See tables 4 and 7.)

State and local government

Wages and salaries for State and local government workers rose 2.7 percent in the year ended September 2005, greater than the gain of 2.0 percent for September 2004. Benefit costs rose 6.1 percent for the year ended September 2005, compared with the gain of 6.4 percent for the year ended September 2004. (See tables B, 5, and 8.)

For the year ended September 2005, compensation costs increased 3.6 percent for educational services, outpacing the 2.7 percent increase for the year ended September 2004. Compensation costs for colleges and universities rose 3.5 percent, a significant increase from the 1.9 percent gain for the year ended September 2004. Among occupational groups, compensation costs of service workers rose 4.6 percent for the year ended September 2005, compared with gains of 4.4 percent for blue-collar workers and 3.5 percent for white-collar workers. (See table 2.)

Annual changes, constant dollars, not seasonally adjusted

Quarterly and annual changes are computed in terms of June 1989 dollars to give an approximate measure of changes in compensation costs after adjustment for the changes over the same time in the price of consumer goods and services. These estimates, in "constant dollars," showed annual compensation costs for civilian workers decreased 1.5 percent for the year ended September 2005, compared with a 1.2 percent over-the-year increase for September 2004. Compensation costs in private industry declined 1.6 percent in the year ended September 2005, compared with a 1.2 percent advance in September 2004. Compensation costs decreased 0.9 percent for State and local government for the year ended September 2005, compared with an over-the-year gain of 0.8 percent in September 2004. These inflation-adjusted ECI series were derived using the Consumer Price Index for All Urban Consumers (CPI-U), U.S. City Average All Items. (See table D and the Explanatory Note for more details.)

Beginning with the release of the March 2006 estimates, the ECI will publish industry categories based on the 2002 North American Industry Classification System (NAICS) and classify jobs into occupational categories according to the 2000 Standard Occupational Classification (SOC) Manual. These systems will replace the 1987 Standard Industrial Classification (SIC) Manual and the Occupational Classification System (OCS) currently being used in the ECI. Broad categories, such as civilian workers and private industry workers, are comparable for both the old and new classification systems; however, some detailed occupational and industry classifications (even with the same title) may not be comparable. Some new series will be introduced while others will be dropped. For more detailed information on NAICS and SOC, including background and definitions, see the BLS websites: http://www.bls.gov/bls/naics.htm and http://www.bls.gov/soc/home.htm.

In addition, several computational changes will be introduced, including rebasing all series to December 2005=100 from June 1989=100, and the initiation of new employment weights and seasonal adjustment factors. At the same time, an improved process for imputing costs for missing values will be introduced.

ECI data are available on the Compensation Cost Trends page at http://www.bls.gov/ncs/ect/home.htm. To access data using Anonymous FTP, use the Internet address ftp://ftp.bls.gov.

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