U.S. EMPLOYMENT COST INDEX, Q3 2025 COMMENTARY

2025 Third Quarter Summary – Growth in compensation costs continues downward trend, though still above general inflation

For the tenth quarter in a row (since June 2023), the 12-month growth rate of U.S. employer costs for employee compensation (controlling for occupational composition) exceeds that of the general cost of living. However, the gap between the two has shrunk to half a percent. Released on Dec 10, 2025, the U.S. Bureau of Labor Statistics (BLS) Employment Cost Index (ECI) for the 12 months ending in September, ticked down to 3.5 percent from last quarter’s 3.6 percent. The US household Consumer Price Index (CPI) for the same 12-month period rose to 3.0 percent (all items index), up from 2.7 percent in June (Chart 1, Table 1).  

 Chart 1

See Chart 1 Data Table for Employment Cost Index for Total Compensation All Civilian Workers, 12-month Percent Change. 
 Table 1 

See Table 1 Data Table for employment compensation index 12-month% change in total compensation, wages and salaries, and total benefits for all civilian workers (not seasonally adjusted).

Wages and Salaries versus Total Benefits – Union/Nonunion Differences 

For all civilian workers, the growth rate of wages and salaries, and total benefits continue their post-Covid convergence (Chart 2). Separating the workforce into unionized and non-unionized, it becomes evident that this overall convergence is being driven by the larger non-unionized workforce (Chart 3). The 12-month ECI being 3.5 percent for both wages and salaries and total benefits for all civilian workers, but 4.8 percent and 3.9 percent for wages and salaries and total benefits, respectively, for unionized workers. In short, compensation for the unionized workforce has not yet finished recovering from high increases in the cost of living earlier in the decade. 

Chart 2

See Chart 2 Data Table for Employment Cost Index for Wages and Salaries and Total Benefits All Civilian Workers, 12-month Percent Change.  

Chart 3

See Chart 3 Data Table for Employment Cost Index for Wages and Salaries and Total Benefits by Union Membership All Civilian Workers, 12-month Percent Change 

Total and Healthcare Benefits  

The most dramatic acceleration in the ECI series appears in the continued rapid rise in the cost of employer-provided health insurance.  (This is tracked only for private industry workers.) For the twelve months ending in September, private sector health insurance costs rose 6.1 percent. This is the first time in 20 years that year-on-year health insurance costs rose by more than 6 percent (Chart 4). 

With this level of acceleration in the costs of employer-provided health insurance, there could soon be more “benefit cost sharing” asked of workers.  

Chart 4 

See Chart 4 Data Table for Employment Cost Index for Total Benefits and Health Insurance All Private Industries Workers, 12-month Percent Change. 

Data Integrity Concerns 

The quality of the ECI report remains very high. It is understandable, however, that some data users may be concerned about the trustworthiness of these data. We address four possible concerns below: 

• Allegations of political bias at the BLS are UNFOUNDED. Since taking office, some Administration officials have met unwelcome economic news by impugning the trustworthiness of the agencies that produce the data. In no case have they provided proof of data manipulation. At BLS, the only presidential appointee is the Commissioner, who has no access to microdata or to the programs that process data, and who never sees the statistics in a release before they are final.    
• Firing the BLS Commissioner on August 1 has NOT opened the door to data manipulation. Since the departure of the BLS Commissioner, the agency has been led by Acting Commissioner Bill Wiatrowski, who is a long-tenured BLS civil servant. There have been no reports of any attempts to manipulate the data. Instead, insiders have reassured their outside contacts that any such attempts would be rebuffed or cause them to quit and report the manipulation. 
• Delays in publishing this ECI reports and others do NOT reflect data manipulation. All BLS data collection and processing, including for the ECI, was suspended for 43 days during the recent partial government shutdown. Restating those operations has been challenging, especially because BLS has lost about 25% of its staff since February and 1/3 of its leadership positions are vacant. This staffing shortage is due to departures encouraged by policies and a continuing hiring freeze.  
• Lower response rates to the National Compensation Survey (NCS) do NOT affect the integrity of the headline numbers. The ECI is based on the NCS. Chart 5 below shows the long-term decline in NCS response rates and that the 40.6% response rate for Q3 2025 is the lowest on record. The shutdown and staffing shortages likely suppressed responses this quarter, but they are also part of a longer trend. This trend, which is typical of surveys universally, is very troubling for the future because lower response rates raise costs, limit the ability to report granular data (by smaller industries, geographies, occupations, etc.) and could introduce undetected biases. Nevertheless, ECI response rates remain much higher than found in the private sector and its standard errors for the highly aggregated numbers have not changed noticeably.  

Chart 5

See Chart 5 Data Table for Employment Cost Index (National Compensation Survey) Response Rate, Percent of Selected Employers Participating.

Data Notes: The Employment Cost Index (ECI) is produced by the U.S. Bureau of Labor Statistics to measure trends in the costs of compensation paid by employers to their employees, free from the influence of employment shifts among occupations and industries. The ECI is one of the labor market indicators used by the Federal Reserve Board to monitor the effects of fiscal and monetary policies and is released quarterly with a one-month lag.  

Data for the Q3 2025 reference period (the 3-months ending in September 2025) were collected from a probability sample of approximately 26,300 occupational observations selected from a sample of about 6,200 private industry establishments and approximately 7,300 occupational observations selected from a sample of about 1,400 state and local government establishments that provided data at the initial interview. 

Link to most recent ECI release: https://www.bls.gov/news.release/pdf/eci.pdf.   

The Institute for Compensation Studies (ICS) at Cornell University’s ILR School is an interdisciplinary center that researches, teaches and communicates about monetary and non-monetary rewards from work, and how these rewards influence outcomes for individuals, companies, industries, and economies. At the crossroads between scholarship and practice, ICS is an exchange dedicated to helping new knowledge hit its mark in the world of work. 

www.ilr.cornell.edu/ics 

Contact: 

Erica L. Groshen 

Senior Economics Advisor 

Institute for Compensation Studies  

erica.groshen@cornell.edu 

Authors: 

Linda Barrington, Cornell SC Johnson College of Business 

Seung-Hun Chung, Yale University 

Erica L. Groshen, Cornell University – ILR School 

The Institute for Compensation Studies 

ICS-ILR@cornell.edu