Tuesday, August 4, 2015

BLS: actually, excluding incentive pay, wages grew at +.6% in both Q1 and Q2

 - by New Deal democrat

Worth repeating, from John Jansen at Across the Curve:
"I wanted to make a few observations on the ECI report following our conversation with the BLS....  The sharp deceleration in the growth rate of the wages and salaries component (which accounts for about 70% of total compensation) was driven by a sharp falloff in incentive pay this quarter versus Q1.... Excluding commission sale incentives, wages and salaries were unchanged at a solid 0.6% q/q pace in both quarters."
Wow!  So it turns out the poor ECI may not have been poor at all. There were supersized bonuses paid out in Q1 that, seasonably, weren't paid out in Q2.

I just wish the BLS would include crucial information like that in their report, instead of giving it out privately in phone conversations, in this case to a representative of TD Securities, leading to this trading advice by the analyst, which was passed on to Jansen:

"Fade the ECI weakness."

IMO, the public should have been informed of the important unusual factors in the ECI report, so that everybody had it at the same time.

P.S.: I can't vouch for the thirdhand hearsay math in the above quote. Combined wage growth for Q1 and Q2 in the ECI totalled +0.9%. I don't see how we get to +.6% + .6% from there, especially if we back out part of the increase. Just another reason to share the important qualifying information transparently in the report.