Markets

US workers see fastest wage increase in a decade

US workers see fastest wage increase in a decade

Americans boosted their spending by the most in almost four years in the July-September quarter.

Benefits increased 2.5 percent in the private sector, the Bureau of Labor Statistics (BLS) reported October 31.

The department's employment cost index jumped 0.8 percent, beating economists' estimates of 0.7 percent.

Wages and salaries make up roughly 70 percent of compensation costs for US firms, while nonpay benefits take the other 30 percent.Wage growth slowed substantially after the great recession and has lagged behind the massive growth in U.S.jobs and equity markets throughout the recovery.

The unemployment rate fell to 3.7 percent in September, the lowest level since 1969.

USA labor costs accelerated in the third quarter as wages for both private and government workers surged amid tightening labor market conditions, Reuters reports. The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack. He added that the gains are a "testimonial to the robust employment picture is the broad-based gains in jobs across industries". 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. There are a record 7.14 million open jobs. The Paychex IHS Markit Small Business Employment Watch report for October again reflects a tight labor market, a slight dip in hiring, and an uptick in wages. Benefits grew 2.6 percent in the year ending in September, versus 2.4 percent in the prior year.




Firming wages support views that inflation will hover around the Fed's 2.0 percent target for a while.

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.

Workers at United States Steel Corp X.N are set to receive a hefty pay rise also. The personal consumption expenditures price index excluding the volatile food and energy components has increased 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.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they can not find full-time employment, fell one-tenth of a percentage point to 7.4 percent, matching a 17-year low hit in August. Many economists expect that will be above 3 percent for the first time since April 2009. Annual inflation was 2.3 percent in September, according to the Labor Department. 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. The service sector contributed 189,000 to the total. While manufacturing and other blue-collar professions are seeing some of the fastest job growth since the mid-1980s, pay is not rising.


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