The FINANCIAL — U.S. labor costs climbed in the third quarter, a sign wages may be starting to pick up as the job market tightens, according to Nasdaq.
The employment-cost index, a broad measure of workers’ wages and benefits, rose a seasonally adjusted 0.6% in the third quarter from the second quarter, the Labor Department said on October 30.
The increase matched the expectation of economists surveyed by The Wall Street Journal.
Wages and salaries for civilian workers, which reflect more than two-thirds of employee costs, grew 0.6% in July through September, while benefits rose 0.5%.
The latest compensation gains were due to higher employment costs for both civilian and government workers.
Compensation costs can ebb and flow from quarter to quarter. On an annual basis, wages and benefits are growing modestly. Total compensation grew 2% in the third quarter, compared to a year earlier. That was the same pace as in the spring.
The Federal Reserve is monitoring wage gains as it weighs whether the economy is strong enough to begin raising interest rates from near zero, possibly as soon as December. Economists believe price and wage increases should gain traction as the economy improves, the labor market tightens and employers compete for a smaller pool of job candidates.
But previous signs of wage increases have been short-lived. Another measure of wages from the Labor Department’s monthly jobs report showed workers’ hourly wages, excluding benefits, dipped by a penny last month after jumping in August.
In a speech in September, Fed Chairwoman Janet Yellen acknowledged the labor market has made considerable progress over the past several years, but noted the “slow pace at which hourly wages and compensation have been rising, which suggests that most firms still find it relatively easy to hire and retain employees.”
A separate report released Friday by the Commerce Department showed Americans’ personal income grew just 0.1% in September, the smallest monthly gain since March.
Job gains have also slowed in recent months, averaging just 167,000 from July through September, while the unemployment rate held steady at 5.1% last month.
“Nonetheless, labor market indicators, on balance, show that underutilization of labor resources has diminished since early this year,” Fed officials said Wednesday, following a two-day policy meeting. The committee also suggested it may raise rates “at its next meeting.”
The economy overall has slogged through the third quarter despite global turmoil. Gross domestic product grew at a modest 1.5% seasonally adjusted annual rate, a marked slowdown from the second quarter’s 3.9% expansion, the Commerce Department said on October 29.
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