Long Term Perspective
Federal Reserve officials closely monitor the employment cost index, which measures total compensation costs. Compensation includes wages and salaries as well as benefits. Compensation costs moderated sharply in 2002. The spurt in the first quarter of 2003 is strongly related to higher costs for health insurance and not expected to be repeated during the rest of the year.

Short Term Perspective
The employment cost index rose 3.9 percent in the third quarter of 2003 versus year ago levels, accelerating from the previous quarter. Wages and salaries rose 2.9 percent in the third quarter remaining in a tight range over the past several quarters. As long as labor market conditions are sluggish, wages and salaries are likely to post only modest gains in the next several quarters as well.

PPI: Intermediate vs. Crude Materials   •   Excluding Food & Energy Prices: Intermediate vs. Crude   •   CPI vs. PPI - Finished Goods

Excluding Food & Energy Prices : CPI vs. PPI   •   Employment Cost Index vs. Wages & Salaries   •   Alternative Inflation Measures