Wages and Salaries Beat Expectations, Hit 10-Year High

Andrew Cummings
November 3, 2018

Economists polled by Reuters had forecast payrolls would increase by 190,000 jobs in October and the unemployment rate would be unchanged at 3.7 percent.

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.

The Labor Department's closely watched monthly employment report on Friday also showed the unemployment rate was steady at a 49-year low of 3.7 percent as 711,000 people entered the labor force, in a sign of confidence in the jobs market.

USA job growth likely rebounded in October, with wages expected to have recorded their largest annual gain in 9-1/2 years, pointing to further labour market tightening that could encourage the Federal Reserve to raise interest rates again in December. The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack. "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.


The smallest wage growth, 1.6 percent, was in natural resources, construction, and maintenance jobs. Benefits grew 2.6 percent in the year ending in September, versus 2.4 percent in the prior year. They were up 2.6 percent in the 12 months through September after rising 2.9 percent in the year to June.

"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.

The private sector added 227,000 jobs in October, Automatic Data Processing (ADP) reported Oct. 31, beating analysts' expectations.

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.


"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.

With 3.7 percent unemployment, some economists view the jobs market as being close to or at full employment. They were up 2.6% in the 12 months through September after rising 2.9% in the year to June. The consumer-price index rose 2.3% from a year earlier in September, the Labor Department said.

"It's not about the tax cuts".

Fed Chairman Jerome Powell is expected to approve another rate hike in December. While manufacturing and other blue-collar professions are seeing some of the fastest job growth since the mid-1980s, pay is not rising. The service sector contributed 189,000 to the total. This article is strictly for informational purposes only.


Other reports by iNewsToday

FOLLOW OUR NEWSPAPER