Anyone who priced escalation off the first quarter should re-run the numbers.
BLS released Employment Cost Index data for the three months ended June on July 31. Construction wages and salaries rose 1.5% seasonally adjusted. The prior quarter was 0.0%.
A Full Reversal in 90 Days
Construction total compensation, which includes benefits, rose 1.2% for the quarter against 0.3% for the quarter ended March. The construction total compensation index went from 168.818 in March to 170.861 in June on a December 2005 base of 100. Wages and salaries moved from 171.769 to 174.274.
Over 12 months, not seasonally adjusted, construction total compensation rose 3.5%. That’s up from 3.2% in the year ended March, though still below the 3.8% posted in the year ended June 2025. The deceleration story from last year is intact. The within-year reversal is new.
Construction beat the comparison groups on both timeframes. Its 3.5% annual figure ran ahead of goods-producing industries overall at 3.4% and manufacturing at 3.3%. For the quarter, construction’s 1.5% wage gain outpaced manufacturing at 1.0%, goods-producing at 1.2%, and service-providing at 0.8%.
That’s the sharpest quarterly reacceleration among the major industries BLS breaks out.
Why ECI and Not Average Hourly Earnings
ECI measures what an employer actually pays for a fixed basket of jobs, including benefits, holding occupational mix constant. Average hourly earnings moves when the composition of who’s working changes. If a contractor lays off apprentices and keeps journeymen, average hourly earnings rises without anyone getting a raise. ECI doesn’t have that problem, which is why it’s the series the Federal Reserve watches and the right one for escalation clauses.
Economy-wide, civilian worker compensation rose 0.9% for the quarter and 3.4% over 12 months. Private industry workers came in at 3.3% annually, split between 3.1% for wages and 3.8% for benefits. That 0.7-point spread is a reminder that the visible number on a wage sheet understates what a head actually costs.
For the construction, extraction, farming, fishing and forestry occupational group in private industry, 12-month total compensation rose 3.7%.
What to Do With It
A GMP negotiated in April on the assumption that construction labor costs had gone flat now looks optimistic. One quarter isn’t a trend, but it is enough to move the midpoint of a reasonable escalation assumption, particularly on long-duration work where the compounding runs.
Pair it with the same week’s JOLTS data showing 305,000 open construction jobs, up 36% year over year, and the picture is coherent: the labor market didn’t loosen when spending softened, and the price of labor responded accordingly.
That’s a live issue on any job with a long tail. A project like the University of Kentucky’s $285 million agricultural research building, which broke ground in June 2024 and completes this November, has run its entire schedule through a period where quarterly labor-cost prints have swung from 0.0% to 1.5% and back. Buyout timing on a job like that is worth more than the escalation clause.