Wages, which account for 70 percent of employment costs, jumped 0.9 percent in the third quarter after climbing 0.5 percent in the prior period.
Wages and salaries for civilian workers increased almost 1 percent, while benefits costs jumped 0.4 percent. With unemployment at 3.7 percent, the uptick in wage growth suggests that businesses are ramping up efforts to expand their payrolls with greater compensation.The ADP national employment report, also released Wednesday, showed private businesses adding 227,000 jobs in October, beating economists' expectations for an increase of 189,000.
US job growth likely rebounded in October, with wages expected to have recorded their largest annual gain in 9-1/2 years, pointing to further labour market tightening that could encourage the Federal Reserve to raise interest rates again in December. The ECI is widely viewed by policymakers and economists as a reliable predictor of core inflation.
But acceleration in employment growth likely was tempered by Hurricane Michael, which struck Florida in mid-October.
Prices also have been rising in the past year, especially for gas and rent, but wages are outpacing inflation by a significant margin. Unemployment is at a 49-year low and there are more job openings than unemployed Americans, which forces companies to fight for available workers. Payrolls rose by 134,000 jobs in September, the smallest gain in a year, after Hurricane Florence drenched North and SC, weighing on restaurant and retail employment.
The Present Situation Index - based on consumers' assessment of current business and labor market conditions - turned in an even bigger gain, rising from 169.4 to 172.8. Annual inflation was 2.3 percent in September, according to the Labor Department.
That is forcing more companies to raise pay to attract and keep workers.
The Fed is not expected to raise rates at its policy meeting next week, but economists believe October's strong labor market data could see the USA central bank signal an increase in December. They advanced 2.6 percent from a year earlier, compared with 2.9 percent in the second quarter.
With 3.7 percent unemployment, some economists view the jobs market as being close to or at full employment. Many economists expect that will be above 3 percent for the first time since April 2009. That is seen supporting the economy through at least early 2019 when gross domestic product is expected to significantly slow as the stimulus from the White House's $1.5 trillion tax cut package fades. So far, hiring in the manufacturing sector does not appear to have been affected by the White House's protectionist trade policy, which has contributed to capacity constraints at factories.
Economists and investors expect the Fed to continue gradually raising interest rates, including a December increase that would be the year's fourth. This article is strictly for informational purposes only.