US: ECI also shows wage growth starting to stabilize

Research evidence excerpt

US: ECI also shows wage growth starting to stabilize

J P M O R G A N North America Economic Research

31 July 2026

US: ECI also shows wage growth

starting to stabilize

The employment cost index (ECI) showed total hourly compensation expenses Economic and Policy Research

rose 0.9% (3.6%ar) between March and June. Except for a brief dip in 2H25 the Abiel Reinhart

quarterly rates have held in a narrow range over the last couple of years, and the (1-617) 712 9122

over-year-ago rate has now held at 3.4% for three straight quarters. The trends in abiel.reinhart@jpmchase.com

this report, along with the gradual drop in the unemployment rate, suggest that JPMorgan Chase Bank NA

much of the compensation deceleration this cycle is behind us. That would leave

compensation higher than in the pre-COVID period and more aligned to the pre-

GFC period. That is more true for total compensation than it is for wages.

Employment cost index ECI wages, average hourly earnings, and Atlanta Fed wage tracker

Percent, sa %oya

%oya Atlanta wage tracker, median change

6 7

Private average

4 5 hourly earnings

2 3

1 ECI private wages

%q/q, saar

0 1

00 05 10 15 20 25 12 14 16 18 20 22 24 26

Source: BLS, J.P. Morgan Source: BLS, Atlanta Fed, J.P. Morgan

In terms of inflation implications, this level of compensation growth is not too

concerning if productivity can remain high. Despite a couple of disappointing

quarters, including what we forecast will be growth of just 0.5%q/q saar in 2Q,

productivity is still on track to rise 1.9%oya in 2Q. Using 3.4%oya ECI for hourly

compensation growth, that would then imply unit labor cost growth of 1.5%. The

productivity report uses alternative compensation data, but we estimate it will

show a similar ULC of 1.7%oya. Were quarterly productivity numbers to keep