December 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 September to December 2005, seasonally adjusted, the same increase that occurred between June and September, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Benefit costs between September and December rose 1.1 percent and continued to outpace the gain in wages and salaries for civilian workers, 0.8 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).

Quarterly changes, seasonally adjusted

Compensation cost gains for civilian, private sector, and State and local government workers were identical in the September to December quarter to their respective gains in the prior quarter. Civilian and private industry compensation costs rose 0.8 percent. For State and local government workers, compensation costs rose 1.1 percent. (See tables A and 1.)

Benefit costs advanced 1.1 percent for civilian workers in the December quarter, compared with a 1.3 percent gain in the September 2005 quarter. Private sector benefit costs rose 0.9 percent for the December quarter, following the 1.3 percent gain in the previous quarter. Benefit costs for State and local government workers increased 1.5 percent in the December quarter, compared with a 1.7 percent gain in the prior quarter.

Wages and salaries of civilian workers rose 0.8 percent in the December quarter, compared with a gain of 0.6 percent during the prior quarter. Private industry workers wages and salaries increased 0.6 percent during the December 2005 quarter, the same increases as in the previous three quarters. Wages and salaries in State and local government advanced 0.9 percent during the September to December 2005 period, following an increase of 0.7 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 December 2005, compared with their over-the-year increases for December 2004. Compensation costs for civilian workers increased 3.1 percent for the year ended December 2005, which was lower than the 3.7 percent over-the-year increase for December 2004. Compensation costs in private industry rose 3.0 percent in the year ended December 2005, slowing from a 3.8 percent increase in December 2004. In contrast, compensation costs increased 4.1 percent for State and local governments for the year ended December 2005, which was greater than the over-the-year gain of 3.5 percent in December 2004. (See tables B, 2, and 3.)

The components of compensation showed differences in their rate of change. While increases in wages and salaries continued at a moderate pace, the sharp increases in benefit costs seen over the past several years began to increase at a slower pace. For civilian workers, wages and salaries rose 2.6 percent in the year ended December 2005, compared with a gain of 2.4 percent in December 2004. Benefit costs gained 4.5 percent for civilian workers for the period ended December 2005, slowing sharply from an increase of 6.9 percent for the year ended December 2004. (See tables B, 5, 6, and 8.)

Nonfarm private industry

For the year ended December 2005, compensation costs in private industry increased 3.3 percent for goods-producing industries, lower than the increase of 4.7 percent for the year ended December 2004. The rise in compensation costs for manufacturing moderated for the year ending December 2005, advancing 3.4 percent compared with the 5.0 percent gain in December 2004. In contrast, compensation costs for construction rose 3.7 percent in December 2005, compared with a 2.4 percent gain in December 2004. (See table 3.)

The over-the-year increase in compensation for service-producing industries was 2.8 percent, compared with a 3.3 percent gain for the year ended December 2004. Among service-producing industries, compensation gains in transportation and public utilities moderated for the year ending December 2005, rising 2.4 percent compared with an increase of 3.9 percent in December 2004. (See table 3.)

Over-the-year compensation cost increases were 3.2 percent for white-collar occupations, 2.6 percent for blue-collar occupations, and 2.4 percent for service occupations for the year ended December 2005. Among white-collar occupational groups, compensation cost changes ranged from 2.9 percent for executive, administrative, and managerial workers to 4.2 percent for sales employees. Among blue-collar occupational groups, compensation cost increases ranged from 1.7 percent for machine operators, assemblers, and inspectors to 3.0 percent for transportation and material moving occupations. (See table 3.)

Compensation costs for union workers advanced 2.8 percent over the year ended December 2005, slowing from the 5.6 percent gain for the year ended December 2004. For nonunion workers, compensation costs rose 3.0 percent for the year ended December 2005, compared with a gain of 3.4 percent for December 2004. Benefit costs for union workers rose 3.5 percent for the year ended December 2005, decelerating sharply from the gain of 10.3 percent in December 2004. Benefit costs for nonunion workers advanced 4.2 percent over the year ended December 2005, slowing from an increase of 6.2 percent in December 2004. Wages and salaries for union workers rose 2.3 percent for the 12 months ended in December 2005, compared with an over-the-year increase of 2.5 percent for nonunion workers. (See tables C, 4, 7, and 8.)

Among union blue-collar workers, compensation costs advanced 2.9 percent, compared with the gain of 2.5 percent for nonunion blue-collar workers for the 12 months ended in December 2005. In manufacturing industries, compensation cost gains for union workers slowed sharply, rising 2.5 percent for the year ended December 2005, significantly less than the 7.6 percent in December 2004. For nonunion workers in manufacturing, compensation costs rose 3.6 percent for the year ended December 2005, compared with an over-the year gain of 4.2 percent in December 2004. (See table 4.)

Among the four geographic regions, increases in compensation costs ranged from 2.3 percent in the South to 3.4 percent in the Northeast and Midwest for the year ended December 2005. Compensation costs rose 3.0 percent in the West. Gains in wages and salaries ranged from 2.0 percent in the South and West to 3.3 percent in the Midwest for the year ended December 2005. Wages and salaries rose 2.8 percent in the Northeast for the year ended December 2005. (See tables 4 and 7.)

State and local government

Wages and salaries for State and local government workers rose 3.1 percent in the year ended December 2005, greater than the gain of 2.1 percent for December 2004. Benefit costs rose 6.0 percent for the year ended December 2005, compared with a gain of 6.7 percent for the year ended December 2004. (See tables B, 5, and 8.)

For the year ended December 2005, compensation costs increased 4.0 percent for educational services, outpacing the 3.0 percent increase for the year ended December 2004. Compensation costs for colleges and universities rose 3.8 percent, a significant increase from the 1.9 percent gain for the year ended December 2004. Among occupational groups, compensation costs of service workers rose 4.8 percent for the year ended December 2005, compared with gains of 4.3 percent for blue-collar workers and 3.9 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 were -0.3 percent for the year ended December 2005, compared with a 0.5 percent over-the-year change for December 2004. Compensation costs in private industry changed -0.4 percent in the year ended December 2005, compared with a 0.5 percent change in December 2004. Compensation costs advanced 0.6 percent for State and local government for the year ended December 2005, compared with an over-the-year change of 0.2 percent in December 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 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. Collection of severance pay and supplemental unemployment plans, which are included in the total compensation component in tables 1 through 4, and the benefit component in table 8, will be discontinued beginning with the March 2006 estimates. New series will be added, including series for the census divisions and for series on workers, excluding incentive paid occupations. At the same time, an improved process for imputing costs for missing values will be introduced.

Several publications are being prepared to provide more information on the computational changes to the ECI and the transition to NAICS and SOC. In addition, the April 2006 Monthly Labor Review will be devoted to a series of articles detailing the changes. The latest information on the transition will be available on the BLS website at http://www.bls.gov/ncs/ect/#notices.

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.

For technical assistance in using the BLS Internet site, send e-mail to webmaster@bls.gov. For ECI data requests, send e-mail to ocltinfo@bls.gov.

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