Government pay now pays

Yields are moving higher, S&P futures lower after the Q1 Employment Cost Index rose 1.2% q/o/q, above the estimate of up 1%. That is the most since Q1 2023. The y/o/y gain of 4.2% was the same pace seen in Q4 with wages/salaries higher by 4.4% and benefits up by 3.7%. 

The private sector internals saw wages and salaries up by 4.3% y/o/y, the same seen in Q4 and total comp was higher by 4.1% y/o/y. I want to put that 4.1% gain in perspective as while it is down from a peak of 5.5% in June 2022, the 20 yr pre Covid trend was just 2.7%. 

It seems that in government work is where the upside surprise took place as wages and salaries increased to a 5% y/o/y gain from 4.7% in Q4. Total comp growth was 4.8% y/o/y and that compares with an average of 2.9%. That’s also just below the highest growth in at least 25 years.