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You’ve heard the expression that something has just moved from the sublime to the ridiculous? With the new Labor Department report on employment costs, claims that U.S. wage inflation is finally taking off have moved from the ridiculous to whatever comes afterwards – and that may mean “conflicted.”  

The Employment Cost Index (ECI) has recently become the principle basis for the wage inflation case because, six years into a dreary economic recovery, it’s the only measure indicating that compensation might not be continuing its decades-long stagnation. Therefore, it’s become a mainstay for monetary policy hawks who insist that American labor markets crippled by the Great Recession really have healed, and that it’s high time for the Federal Reserve to raise its key interest rate from its current near-zero level. Never mind, by the way, that none of the ECI’s readings adjusts for inflation, and that its headline includes benefits (which include lots of one-time rewards handed out to workers recently by nervous employers seeking more control over and flexibility with their payrolls).

It’s not my intention to comment today on the interest rate debate. But nothing could be clearer than that this morning’s ECI reading means that the wage inflation vigilantes need to change their tune, or they need to find some new evidence that American workers aren’t still receiving the short end of the stick.

The always provocative – and often on-target – ZeroHedge.com site has pointed out that on a sequential basis (these reports come out quarterly), the new ECI headline change was the worst since the series began in 1982. More revealing, though, are the year-on-year changes released this morning.

According to the Labor Department, the increase in total compensation costs for civilian workers – including wages, salaries, and non-wage benefits – was two percent. And even with inflation running well below that level, this means that employees are barely staying ahead of living costs. The comparable figure for the previous year? The same two percent, with the same implications.

Over the last year, wages and salaries rose 2.1 percent in pre-inflation terms – slightly better than the previous year’s 1.8 percent. But despite the excitement among economists and pundits over benefits, their year-on-year increase of 1.8 percent was well below 2013-2014’s 2.5 percent.

But the bad news for inflation hawks (and for the nation’s workforce) doesn’t stop there. For even these crummy numbers were propped up by compensation for government workers. Their wages, salaries, and benefits aren’t set by market forces, which means that they tell us nothing about the state of labor markets. Instead, government wages etc are set by government decisions.

Take out compensation determined solely by politicians’ whims, and the headline ECI figure rose by only 1.9 percent from June, 2014 to June, 2015. That’s less than the previous year’s anemic two percent even. Wage and salary increases picked up some during this period – from 1.9 percent to a still lousy 2.2 percent. But benefits really tanked – from a 2.4 percent rise from June, 2013-June, 2014 to 1.4 percent. That’s barely ahead of inflation.

Today’s ECI did contain one mild surprise: The June year-on-year increase for overall manufacturing compensation (2.5 percent) topped that for private industry as a whole, and was also faster than the previous year’s rise (2.1 percent). At the same time, before the recession hit, total manufacturing pay often registered much bigger annual gains.

I’m not big on conspiracy theories, and by no means do I believe that the economic argument for Fed rate hikes is nonsensical. Far from it. But given these results, going forward, it’s going to be important to keep in mind one other big source of fuel for any continuation of wage inflation claims – higher interest rates, all else equal, would mean much bigger profits for America’s banks. And many other finance companies have based their hopes for bigger profits on expectations of rate hikes. So when you start hearing again about wage inflation claims, which you surely will whatever the data say, it will be more important than ever to consider the source.