US job growth seen accelerating; strong annual wage gain expected

U.S. Employment Costs Rise More Than Forecast as Pay Jumps

"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.

Independent data released this week points to slightly higher wages for workers and a still-tight labor market for employers.

That pushed the annual increase in wages and salaries to 2.9 percent, the biggest gain since September 2008, from 2.8 percent in the year to June.

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.

Rising wages should help support consumer spending and soften the hit to the economy from a softening housing market and stalling business investment.

When adjusted for inflation, wage increases were higher in 2015 and 2016 than they are now, according to the Employment Cost Index. They were up 2.6 percent in the 12 months through September after rising 2.9 percent in the year to June.

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Employment gains averaged 218,000 jobs per month over the past three months, double the roughly 100,000 needed to keep up with growth in the working-age population.

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.

Payroll processor ADP reported that employers added jobs in manufacturing, retail, construction, transportation, leisure and professional services such as engineering. "This is about the gradual tightening in the labor market finally forcing employers to pay more", said Ian Shepherdson, chief economist at Pantheon Marcoeconomics. Payrolls increased by 134,000 in September, the fewest in a year. The jobs market is viewed as being close to or at full employment, with the unemployment rate at a near 49-year low of 3.7 percent. There are a record 7.14 million open jobs. The report shows consumers who live in the South enjoyed the strongest job growth, while those in the West saw their paychecks grow the most. Payrolls rose by 134,000 jobs in September, the smallest gain in a year, after Hurricane Florence drenched North and SC, weighing on restaurant and retail employment.

Economists polled by Reuters had forecast the ECI rising 0.7 percent in the July-September quarter. 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 rise has some economists anxious higher inflation may not be far behind.

Wages and salaries for civilian workers increased almost 1 percent, while benefits costs jumped 0.4 percent. The service sector contributed 189,000 to the total. Pay in the "goods-producing sector" has actually slowed in the past year, notes Michael Pence, senior US economist at Capital Economics. This article is strictly for informational purposes only.

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