Employment Cost Index Signals Labor Market Yet to Stabilize

The Q4 Employment Cost Index rose 0.7%, bringing the annual growth rate to 3.4%, the slowest since early 2021. This moderation suggests the labor market is cooling, supporting the Fed's inflation goals while potentially raising concerns about employment stability.

Key Takeaways

• 1.The Employment Cost Index (ECI) rose 0.7% in Q4 2025, a softer-than-expected increase signaling a cooling labor market.
• 2.Year-over-year compensation cost growth slowed to 3.4%, the lowest rate since early 2021.
• 3.Health benefit costs are an exception to the cooling trend, rising 6.4% over the past year.

Table of Contents

• Summary
• Moderation in Compensation Growth Continued Through Year-End
• Subscription Information
• Economics Group
• Required Disclosures
• Important Information for Non-U.S. Recipients

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