The US Employment Cost Index (ECI), published by the Bureau of Labour Statistics, is a measure of the “change in the price that the government and businesses pay for citizen labour”. The people who compile the calendar of economic events regard it as a medium-impact event. Because of this, and also as a result of the fact that it is only produced on a quarterly basis, it can fly under the radar of many, but obviously not all, market participants.
Right now, we expect to see this index rising. If it is not, it indicates that the slack in the economy that the Fed is so concerned about, the continuation of which will tend to put off interest rate rises in the US, will stay in place.
Last Friday the ECI came in at a 0.20% rise, when the consensus among economists was for growth of 0.60%. The immediate result was a surge in the EURUSD pair, indicating a hit for the US dollar.
On this occasion, the US Employment Cost Index assumed high rather than medium importance, at least for a time.
All about jobs this week
One reason for the sensitivity by the market to the ECI might be the fact that payrolls themselves will be centre stage this week. On Wednesday we will have the ADP Employment Change figures, and on Friday the all-important, definitely high-impact event that is US Non-Farm Payrolls report will be released.