Published: Sat, November 03, 2018
Business | By Tara Barton

Workers are earning more in a tight labor market

Workers are earning more in a tight labor market

Economists polled by Reuters had forecast the ECI rising 0.7 percent in the July-September quarter. A separate report Wednesday showed that wages and salaries for private-sector workers rose 3.1 percent from a year earlier.

United States wages and salaries rose by the most in a decade while private sector payrolls increased by the most in 8 months in October, suggesting overall job growth accelerated this month after Hurricane Florence weighed on restaurant and retail employment in September.

The data comes as the Labor Department revealed that job growth in the month of September retreated to its lowest level in the past 12 months, while the unemployment rate fell to its lowest level in nearly 50 years.

The Labor Department's Employment Cost Index showed wages and salaries, which account for 70% of employment costs, jumped 0.9% in Q-3 after climbing 0.5% in the prior Quarter. That was the lowest jobless reading in 49 years. Although this is good news for employees, the Federal Reserve has been raising rates in a speedy fashion to guard against future inflationary pressures, seemingly erasing big salary and hourly payroll gains.

But the anticipated bounce back in job growth is likely to be tempered some what by Hurricane Michael, which struck the Florida Panhandle in mid-October. That's the biggest increase since September 2008. They were up 2.6 percent in the 12 months through September after rising 2.9 percent in the year to June. The Conference Board, which produces the gauge, attributed the positive assessment to a strong labor market.

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The increase was led by improving pay for private-sector workers. The U.S. central bank is expected to raise rates again in December. They were up 2.6 percent in the 12 months through September after rising 2.9 percent in the year to June.

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 US central bank signal an increase in December. The personal consumption expenditures price index excluding the volatile food and energy components, which is the Fed's preferred inflation measure, has increased by 2.0 percent for five straight months.

"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. 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. Most of the wage growth in the Employment Cost Index is coming from service-sector jobs. Construction and manufacturing added 17,000, respectively.

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.

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