Wages for private-sector workers accelerated in the third quarter, but benefit gains cooled
Americans paychecks rose in the past year at the fastest rate in more than a decade, showing a tight labor market is paying dividends for more workers.
Wages and salaries paid to private-sector U.S. workers rose 3.1% from a year earlier in the third quarter, the Labor Department said Wednesday. That was strongest year-over-year gain since the second quarter of 2008.
The latest data adds to “broader evidence that wage growth has continued to trend gradually higher over recent quarters,” Michael Pearce, an economist at Capital Economics, wrote in a note to clients. With labor market conditions still tightening, “we expect wage growth will accelerate further from here.”
The unemployment rate fell to 3.7% in September, the end of the third quarter. That was the lowest jobless reading in 49 years. Combined with steady hiring, that appears to be putting workers in a position to command better compensation.
Economists surveyed by The Wall Street Journal expect Friday’s jobs report will show that a more closely watched pay gauge—average hourly earnings for private-sector employees—rose at better than 3% from a year earlier in October. It would the first time that measure topped 3% since 2009.
UPDATE - 11-02-18 NFP Report: the most important part of today's report is that the increase in average hourly earnings jumped by 3.1%, in line with expectations and up from 2.8% in September
This was the highest print since April 2009.
Wednesday’s wage data came from a broader compensation measure known as the employment-cost index. It accounts for both wages and benefits paid to civilian workers. The overall index rose a seasonally adjusted 0.8% in July through September. The gain was an increase from the second quarter’s 0.6% advance and matched expectations of economists surveyed by the Journal.
Wages and salaries, which account for about 70% of total compensation, rose 0.9% on the quarter. Benefit costs—which include health coverage, retirement benefits and paid leave—advanced a slower 0.4%.
From a year earlier, overall compensation, including that paid to state and local government workers, increased 2.8% in the third quarter.
Benefits growth cooled as wage growth picked up. That could be a sign that employers are shifting compensation to base pay. It also could indicate that tax-cut related bonuses, which propped up benefits growth early in the year, didn’t extend into the third quarter.
The Labor Department said health-care benefit costs accelerated from a year earlier, while growth in other benefits eased. The department will release further details on the composition of benefits in December.
Wednesday’s report showed total compensation for private-sector workers increased 0.8% on the quarter and 2.9% from a year earlier. State and local government employees’ compensation increased 0.8% on the quarter and was up 2.5% from a year earlier.
Worker compensation is now rising at a faster pace than prices. The consumer-price index rose 2.3% from a year earlier in September, the Labor Department said.
The divergent data sends a mixed signal. Many economists view wage growth as a precursor to broader inflation pressures, but recent data showed consumer-price gains are cooling. That could give consumers confidence that they’re in a good position to spend their raises.
A measure of U.S. consumer confidence, released Tuesday, rose in October to a nearly two-decade high. The Conference Board, which produces the gauge, attributed the positive assessment to a strong labor market.