U.S. EMPLOYMENT COST INDEX, Q1 2026 COMMENTARY

2026 First Quarter Summary–Inflation closes in on compensation cost growth 

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Pausing its downward trend that began in December 2022, the 12-month growth rate of the U.S. Bureau of Labor Statistics (BLS) Employment Cost Index (ECI), released on April 30, 2026, held flat at 3.4 percent. In contrast, the Consumer Price Index for All Urban Consumers (CPI-U) jumped to 3.3 percent over the same 12 months, the highest it has been since Q2 2024. As a result, the gap between the two (representing growth in workers’ purchasing power) has shrunk to 0.1 percentage points, the lowest increase in three years (since Q2 2023) (Chart 1, Table 1).

Chart 1 Employment Cost Index for Total Compensation—All Civilian Workers, 12-Month Percent Change

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Table 1 Employment Cost Index 12-Month Percent Change—Not Seasonally Adjusted, All Civilian Workers

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Wages and Salaries versus Total Benefits

The year-on-year employer cost index for employee benefits rebounded from a softening trend, rising to 3.6 percent this quarter, exceeding that for wages and salaries. Costs for all civilian worker wages and salaries grew 3.4 percent, up 0.1 percent points from Q4 2025 (Table 1, Chart 2).

Chart 2 Employment Cost Index for Wages and Salaries and Total Benefits—All Civilian Workers, 12-Month Percent Change

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Union/Nonunion and Government/Private Sector Differences

In the private sector, compensation for the unionized workforce continues to recover from its high-increase post-Covid adjustment period. The 12-month ECI for unionized workforce wages and salaries declined from 4.3 percent to 4.1 percent, and that for total benefits slowed from 3.6 percent to 3.4 percent (Chart 3). The union/nonunion gap in benefits growth has now reversed and the gap for wages and salaries continues to shrink. Compensation in state and local government reveals similar growth in the private sector, unionized or not. In Q1 2026, the 12-month wage and salary ECI state and local government workers rose from 3.3 percent to 3.4 percent, and the cost for employee benefits also rose from 3.5 percent to 3.6 percent over the past 12 months (Chart 4).

Chart 3 Employment Cost Index for Wages and Salaries and Total Benefits by Union Membership—All Private Industry Workers, 12-Month Percent Change

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Chart 4 Employment Cost Index for Wages and Salaries and Total Benefits by Government and Private Industries—All Civilian Workers, 12-Month Percent Change

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Total and Healthcare Benefits

The growth rate of the cost of employer-provided health insurance for private industry workers declined modestly in March 2026 after two quarters of dramatic acceleration. For the twelve months ending in March, private sector health insurance costs rose 5.7 percent, edging down after reaching a 20-year high of 6.4 percent in Q4 2025 (Chart 5). Despite the decline, employers’ costs for healthcare benefits are rising rapidly, increasing the likelihood that employers will look toward additional employee cost sharing of these costs.

Chart 5 Employment Cost Index for Total Benefits and Health Insurance—All Private Industries Workers, 12-Month Percent Change