Employment Cost Index Rises 0.8% in Q3 as Wage Growth Slows, BLS Says
Compensation costs rose 0.8% in the third quarter and 3.4% from a year earlier, BLS said Oct. 30. Wages rose 0.7%, down from 0.9% in the second quarter.
Why it matters
- Compensation costs for civilian workers rose 0.8% in the three months ending in September, seasonally adjusted, the Bureau of Labor Statistics said Friday, Oct. 30. They rose 0.9% in the second quarter.
- Wages and salaries rose 0.7%, down from 0.9%. Benefit costs rose 0.9%, down from 1.0%. Over 12 months, wages rose 3.1% and benefits 3.9%.
- Pay lagged inflation. Adjusted for prices, civilian wages and salaries fell 0.6% over the year and total compensation fell 0.4%, BLS data show.
Data Brief: a summary of published data, with our notes on what it shows.
U.S. employers' compensation costs rose 0.8% in the third quarter, down from 0.9% in the second, the Bureau of Labor Statistics said Friday, Oct. 30, in its employment cost index report. Over the 12 months ending in September, compensation costs for civilian workers rose 3.4%, the same pace as in the year to June.
The employment cost index tracks what employers pay for labor, including wages and benefits. It holds the mix of jobs fixed, so shifts in hiring between high- and low-paid work do not distort it. Quarterly changes are seasonally adjusted. The 12-month changes are not.
How fast did wages grow in the third quarter?
Wages and salaries for civilian workers rose 0.7% in the quarter, BLS said, after 0.9% in the second quarter. Over 12 months they rose 3.1%, down from 3.2% in June and 3.5% a year earlier.
Benefit costs rose 0.9% in the quarter, after 1.0%. Their 12-month gain picked up to 3.9% from 3.8% in June. In private industry, health benefit costs rose 6.4% over the year, according to BLS.
| Employment cost index | Q3 2026 (3 mo.) | Q2 2026 (3 mo.) | 12 mo. to Sept. | 12 mo. to June |
|---|---|---|---|---|
| Civilian compensation | 0.8% | 0.9% | 3.4% | 3.4% |
| Civilian wages and salaries | 0.7% | 0.9% | 3.1% | 3.2% |
| Civilian benefits | 0.9% | 1.0% | 3.9% | 3.8% |
| Private industry compensation | 0.8% | 0.9% | 3.4% | 3.3% |
| Private industry wages and salaries | 0.8% | 0.9% | 3.1% | 3.1% |
| State and local government compensation | 0.6% | 1.0% | 3.5% | 3.6% |
| State and local government wages and salaries | 0.6% | 0.9% | 3.2% | 3.4% |
Source: BLS Employment Cost Index, Table A, Oct. 30. Three-month changes are seasonally adjusted; 12-month changes are not.
Private industry vs. state and local government
Private-sector compensation rose 0.8% in the quarter, after 0.9%. Private wages rose 0.8% and benefits 0.9%. Over 12 months, private compensation rose 3.4% and private wages 3.1%, BLS said.
State and local government costs slowed more. Compensation rose 0.6%, after 1.0% in the second quarter. Wages rose 0.6% and benefits 0.7%. Over the year, public compensation rose 3.5%.
Union workers in private industry saw compensation rise 4.3% over 12 months, compared with 3.3% for nonunion workers, BLS said.
Are wages keeping up with inflation?
No. Adjusted for inflation, civilian wages and salaries fell 0.6% in the 12 months ending in September, and total compensation fell 0.4%, according to BLS's constant-dollar figures. A year earlier, real wages were up 0.6%.
What does the employment cost index mean for the Fed?
Quarterly wage growth slowed, but 12-month compensation growth held at 3.4%. The Fed held its target range at 3.75% to 4% on Oct. 28 in a 10–2 vote, with two members favoring a hike; see our Fed October 2026 decision story. Our FOMC meeting schedule for 2026 and 2027 lists the next meetings. Thursday's third-quarter GDP report showed growth at a 3.4% rate.
BLS said the ECI for December 2026 is due Friday, Jan. 29, 2027, at 8:30 a.m. ET. Starting with that release, the index will use updated employment weights and drop workers' compensation costs, BLS said.
Sources
- U.S. Bureau of Labor Statistics, Employment Cost Index – September 2026 (Oct. 30, 2026), including Table A
- Federal Reserve, FOMC statement, Oct. 28, 2026
- U.S. Bureau of Economic Analysis, GDP (Advance Estimate), 3rd Quarter 2026 (Oct. 29, 2026)
