Wages Highest In 10 Years, Unemployment Remains Level Before Friday’s Jobs Release

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

Wages Rise 3.1 Percent, Fastest in a Decade

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 USA central bank signal an increase in December. All the data points to a still-strong labor market as employers will have to use higher wages as the primary attraction for talent.

Total compensation for civilian workers in the United States increased 2.8 percent over the last 12 months, the report said - up from 2.5 percent.

Wage growth was boosted by a jump in transportation and warehousing, likely reflecting a shortage of truck drivers. But with employers increasingly desperate for workers, they are being forced to offer higher wages.

The ADP national employment report showed private sector employment rose by 227,000 jobs last month, the biggest gain since February and beating economists' expectations for an increase of 189,000. He added that the gains are a "testimonial to the robust employment picture is the broad-based gains in jobs across industries".

Nonfarm payrolls probably increased by 190,000 jobs last month, according to a Reuters survey of economists. "This is about the gradual tightening in the labor market finally forcing employers to pay more", said Ian Shepherdson, chief economist at Pantheon Marcoeconomics. 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.

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The Labor Department's closely watched monthly employment report on Friday is also expected to show the unemployment rate steady at a 49-year low of 3.7 percent. There are a record 7.1 million job openings in the economy. The ECI is widely viewed by policymakers and economists as a reliable predictor of core inflation. Businesses are staffing up at a rapid pace in response to healthy consumer spending and strong economic growth. Benefits grew 2.6 percent in the year ending in September, versus 2.4 percent in the prior year.

At the same time, overall benefits rose at a slower pace in the third quarter, increasing 0.4 percent from the prior period, following a 0.9 percent gain.

"The report shows a booming US economy with a sufficient whiff of wage inflation to keep the Fed on track to raise rates in December and at least twice next year", said David Kelly, chief global strategist at JPMorgan Funds in NY.

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

"I suspect that by mid-2019, labour compensation gains will be at levels that would worry the Fed members", said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. So far, hiring in the manufacturing sector does not appear to have been affected by the White House's protectionist trade policy, which has contributed to capacity constraints at factories.

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