Rising wages boost U.S. labor costs in third quarter

03 November, 2018, 18:24 | Author: Brooke Harris
  • Contractors work on townhouses under construction in Milpitas California U.S. on Thursday Oct. 25 2018. MUST CREDIT Bloomberg

US workers are seeing the largest nominal wage increase in a decade, the Labor Department reported Wednesday, as companies compete harder for employees than they did in recent years. At the same time, the rate of hourly earnings growth in October was at 2.41 percent, rising for the second straight month. The Conference Board, which produces the gauge, attributed the positive assessment to a strong labor market.

A separate report Wednesday showed USA companies added a greater-than-forecast 227,000 jobs in October, according to the ADP Research Institute.

"These are incredible numbers", Trump tweeted.

Nonfarm payrolls probably increased by 190,000 jobs last month, according to a Reuters survey of economists. Benefits grew 2.6 percent in the year ending in September, versus 2.4 percent in the prior year.

The economy created 118,000 jobs in September.

Americans boosted their spending by the most in almost four years in the July-September quarter. The Labor Department said Hurricane Michael, which struck the Florida Panhandle in mid-October, "had no discernible effect on the national employment and unemployment estimates for October".

Benefits for all workers increased 0.4% in Q-3 after rising 0.9% in Q-2.

The private sector added 227,000 jobs in October, Automatic Data Processing (ADP) reported Oct. 31, beating analysts' expectations. The average workweek rose to 34.5 hours from 34.4 hours in September.

The dollar .DXY was trading higher against a basket of currencies.

To combat increased employment costs, employers have been looking to non-salary measures like insurance and benefits packages to retain workers, but may have to start increasing wages to attract and retain talent going forward.

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Worker compensation is now rising at a faster pace than prices. That followed a 2.9 percent gain in the year to June.

"Wages are grinding higher as the labor market continues to tighten", said Justin Weidner, an economist at Deutsche Bank.

"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.

"The risk in 2019 is that the Fed will increase the pace of rate hikes", said Joe Brusuelas, chief economist at RSM in NY.

That may be one reason employers who can find qualified candidates have to pay them more. There are a record 7.1 million job openings in the economy.

Online retail giant Amazon.com Inc AMZN.O announced last month that it would raise its minimum wage to $15 per hour for USA employees starting in November. Workers at United States Steel Corp are set to receive a hefty pay rise also. "Testimonial to the robust employment picture is the broad-based gains in jobs across industries".

Last month, employment in the leisure and hospitality sector likely rebounded after declining by 17,000 jobs in September, the first drop in year.

The jobs market is viewed as being close to or at full employment.

Payrolls increased by 134,000 in September. Retail payrolls rose by only 2,400 amid declines in employment at gasoline stations and sporting goods and music stores.

Construction companies probably hired more workers in October. Government payrolls rose by 4,000 jobs. The services sector did the most hiring, with the biggest expansion coming in trade, transportation, and utility companies.

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