The Employment Cost Index rose 0.8% in the quarter ended September 2025 compared to 0.9% in the previous quarter.
- The Employment Cost Index rose 0.8% in the September 2025 quarter on a seasonally-adjusted basis, compared to a rise of 0.9% in the previous quarter.
- Employment costs rose 3.5% for the 12 months ended in September 2025, compared to 3.9% for the same period last year.
- The cooling wage growth comes amid a weakening job market, with small businesses showing a decline of 120,000 employees in November, according to data from payroll processing firm ADP.
The pace of U.S. labor costs cooled in the third quarter as per the latest report from the Bureau of Labor Statistics released on Wednesday.
The Employment Cost Index (ECI), which measures the change in employers' costs for compensation including wages, salaries, and benefits, rose 0.8% on a seasonally-adjusted basis for the three months ended September 2025, compared to a 0.9% growth in the previous quarter, as per the report.
On an annual basis, the ECI jumped 3.5% for the 12 months ended in September, compared to 3.9% for the same period last year, without seasonal adjustment.
The ECI report comes amid a softness in the labor market. The report, usually released in October, has been delayed over five weeks amid the longest federal government shutdown in U.S. history.
Macroeconomic Backdrop
The ECI, released every quarter, is important for markets to gauge multiple key metrics such as labor market strength and wage inflation. A slower wage growth is one of the lagging indicators for cooling inflation and lowered consumer spending.
Last week, data released by payroll processing firm ADP showed that job creation in the private sector for the latter part of 2025 had plateaued, while pay growth declined. The report additionally noted that small businesses saw a decline of 120,000 employees in November.
The ECI report comes ahead of the Federal Reserve’s rate announcement scheduled for later on Wednesday. Markets will also be looking out for comments from Fed Chair Jerome Powell to indicate the overall state of the economy.
At the time of writing, data from the CME FedWatch tool showed an 89.9% probability of a 25-basis-point rate cut.
How Are Markets Reacting?
U.S. equities were in the red in Wednesday’s opening trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down by 0.02%, the Invesco QQQ Trust ETF (QQQ) fell 0.13%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.07%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘neutral’ territory.
The iShares 7-10 Year Treasury Bond ETF (IEF) was up by 0.04% at the time of writing.
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