- The Employment Cost Index rose 1.4% in the first quarter of 2022, the most since at least 2001.
- The uptick exceeded the 1.1% estimate and marked a pickup from the prior quarter's 1% gain.
- The report shows Americans still enjoying above-average wage growth as inflation got even hotter.
Working Americans' wages rose the most on record through the first three months of 2022 amid intense demand for labor and historically strong inflation.
The Employment Cost Index — one of the most closely watched yardsticks for countrywide wage changes — gained 1.4% through the first quarter, the Bureau of Labor Statistics said Friday. That's the largest one-quarter increase since data collection began in 2001.
Economists surveyed by Bloomberg held a median estimate of a 1.1% increase. The print also showed wage growth accelerating from the 1% jump seen through the fourth quarter of 2021.
The report confirms that the outsize pay gains employees enjoyed throughout 2021 continued into the new year. The months-long imbalance between worker supply and demand — informally known as the labor shortage — increased pressure on businesses to raise wages as they scrambled to rehire. The phenomenon has shown little sign of easing in 2022, with the latest data showing job openings still near record highs at the end of February.
Wage pressures could even be intensifying as the economy inches closer to its pre-pandemic job count. The latest gain exceeded the 1.3% hike seen in the third quarter of 2021, around when the labor shortage first emerged.
While wage growth has been extraordinarily strong throughout the coronavirus crisis, it's still fallen behind inflation. Prices for common goods and services rose 8.5% in the year through March, marking the fastest inflation since 1981. By comparison, the ECI is only up 4.5% from the year-ago period, and Russia's invasion of Ukraine has only worsened the price-growth problem in recent months.
Rising prices actually took a larger chunk out of workers' pay than in the prior 12-month period. Inflation-adjusted compensation shrank 3.7% in the year through March, worse than the 2.9% decline seen through 2021. Unless inflation peters out and wage growth holds strong, most employees will continue to see their buying power shrink.
Who won the biggest first-quarter raises
Wage growth differed dramatically across sectors as the Omicron variant faded, economic restrictions were loosened, and Americans revived their shopping sprees.
Workers in the service industries generally saw the largest gains. Wages at real estate and leasing firms and restaurants rose 2% through the quarter, according to the Friday report. Administrative services and wholesale trade businesses lifted pay by 1.9%.
Employees at aircraft manufacturers saw the largest pay bump of any sector, with wages climbing 2.2% in the three-month period. Conversely, the credit intermediation sector was the only one to see pay broadly shrink as wages fell 0.8%.
Most state and local government workers enjoyed 1% gains in compensation. Hospital workers outperformed slightly with a 1.1% gain, and public administration employees saw compensation climb by 1.5%.
The outperformance by services firms matches the general shift in Americans' spending habits. The swift decline in coronavirus infections saw the economy reopen again, albeit at a slower pace than in 2021. Americans quickly boosted their spending on services, fueling a strong rebound for the industry after the Delta and Omicron waves saw most spending concentrated on goods. With virus cases still relatively low, the rotation could keep service-sector wages climbing well into 2022.