US job growth seen accelerating; strong annual wage gain expected

Ivan Schwartz
November 3, 2018

Wages and salaries climbed in the third quarter to its highest level in 10 years, beating out polled economists' expectations with a 0.9% increase as opposed to the 0.5% forecasted.

For state and local government workers, average pay grew at a slower rate of 2.5 percent for the same period, but benefits costs for these employers rose faster than in the private sector at 3.1 percent.

The surge in wages lifted the Employment Cost Index, the broadest measure of labor costs, which increased 0.8 percent in the third quarter after rising 0.6 percent in the second quarter.

Private sector wages and salaries rose 0.8 percent in the third quarter after increasing 0.6 percent in the prior period.

In the private sector, compensation climbed almost 3 percent over the a year ago, wages and salaries jumped 3.1 percent and benefits 2.5 percent, the department reported.

US employment costs rose by more than forecast in the third quarter as increases in private wages and salaries accelerated, indicating workers are gaining leverage in a tightening labor market. The ECI is widely viewed by policymakers and economists as a reliable predictor of core inflation. That could lower the government's employment count when it's released Friday. There are a record 7.1 million job openings in the economy. "Wage growth is likely to be over 3 percent again soon". They were up 3.1% in the 12 months through September, the biggest increase since Q-2 of Y 2008.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to 62.9 percent last month from 62.7 percent in September.

"The strength in the ADP report supports our view that the underlying trend in the labor market remains upbeat", said Daniel Silver, an economist at JPMorgan in NY.

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The increase was led by improving pay for private-sector workers. The personal consumption expenditures price index excluding the volatile food and energy components has increased 2.0 percent for five straight months.

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.

"Broadening wage pressures across industry groups and across the pay scale are helping to drive sustained gains in wages for workers", said Ellen Zentner, chief economist at Morgan Stanley in NY. Many economists expect that will be above 3 percent for the first time since April 2009.

"It's not about the tax cuts".

Manufacturing expanded by 17,000 jobs and construction gained just as many.

Economists and investors expect the Fed to continue gradually raising interest rates, including a December increase that would be the year's fourth.

Information for this article was contributed by Heather Long of The Washington Post; by Christopher Rugaber of The Associated Press; and by Shobhana Chandra of Bloomberg News.

Other reports by GizPress

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