The Employment Cost Index (ECI) slowed to 0.9% in the 4th quarter of 2023, down from 1.1% in the previous quarter and below the 1% consensus prediction. This represents the lowest increase in employment costs since the 2nd quarter of 2021. The slowdown in wage and benefit growth is expected to contribute to the cooling of inflation, a trend that could influence the Federal Reserve’s decision about interest rate cuts. The slowing wage gains could make the Fed more comfortable cutting its rate as early as March, although most analysts expect the first cut will occur in May or June. The overall decline in labor costs is expected to benefit inflation, but it remains close to pre-pandemic highs.