Economists, business leaders, and savvy investors alike share a common aptitude for tracking traditional global and domestic economic indicators. Familiar statistics such as Gross Domestic Product (GDP), Consumer Price Index (CPI), and the Unemployment Rate, amongst many others, play a massively important role in all levels of decision making. These ratios serve as vital measurements of the economy, helping to steer foreign and domestic economic policy, corporate and individual investment direction, and personal spending habits.
While these economic indicators serve a number of valuable roles, there are many lesser-known, employment-related indicators that give great detail with respect to directional shifts within the economy. Today the employment specialists at Kavaliro will take a brief look at two of these important indicators that you and your business should be paying attention to.
Employment Cost Index (ECI)
The U.S. Department of Labor issues a quarterly report on this lagging indicator, which measures the change in the cost of labor, free from the influence of employment shifts among occupations and industries. The report tracks changes in total compensation, as well as its two main components, salaries and benefits, for three primary categories of workers; civilian, private industry, and government. It breaks the groupings down even further, tracking employment cost changes within individual occupations and geographic region. It is a bottom-line indicator, meaning that its effects are seen in the profitability of the companies that it measures, rather than in top-line revenue figures.
Business executives are wise to familiarize themselves with these important statistics. They give an excellent indication of how your business stacks up against the national and regional averages in terms of controlling employment costs amongst occupational groups. As an example, the ECI for private industry workers in the Miami/Ft. Lauderdale area for the 12 months ended December 31, 2010 was 1.1, representing an increase in employer compensation costs of 1.1%. This compares to a national average for private industry workers of 2.1% during that same timeframe, indicating that increases in labor costs in South Florida have not been as sharp as they have been nationwide. Information like this is essential to cost benchmarking and decision making as you work towards maximizing your bottom line.
Non-Manufacturing Employment Index
Tracked and published by the Institute for Supply Management, this component of the overall Non-Manufacturing Index (NMI) offers a measure of job growth across 18 key non-manufacturing industries, giving great insight into which specific sectors are driving overall economic change. The report is unique in that it segregates non-manufacturing data from the “big business” manufacturing component, offering a detailed look at sectors that tend to be served by the smaller businesses that largely drive the economy as a whole. It is of great value in determining where opportunities and threats will come from, as hiring practices generally speak volumes with respect to projected spending and investment trends.
Published monthly, the employment component of NMI allows for timely data analysis, an aspect that is crucial to its value as a useful forecasting tool. As an example, an indication that scientific and technical industries are reporting increased employee hiring would serve as notice to competitors and supporting businesses that executives are optimistic about future financial prospects. This information should be carefully considered, amongst a number of other inputs, when determining how it should in turn affect budgeting and planning for related businesses.
Summary
While each of these important indicators deserve a lengthy write-up of their own, we hope that we have at least given you a brief glimpse into how and why every business should be paying attention to them. Use them in measuring how your business stacks up, and in determining which direction your industry is headed. To get started, or to learn more about these and other valuable economic indicators, please visit the websites for the U.S. Department of Labor and the Institute for Supply Management. Of course, the employment specialists at Kavaliro are here to discuss how these ratios affect you, your business, and your hiring practices. Feel free to give us a call today.