U.S. Employment Costs Rise on Better Pay for Private-Sector Workers



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WASHINGTON—Compensation for U.S. workers grew at an accelerating rate in the third quarter, a sign a historically tight labor market is yielding better pay for employees.

The employment-cost index, a measure of wages and benefits for civilian workers, rose a seasonally adjusted 0.8% in July through September, the Labor Department said Wednesday. The gain was an increase from the second quarter’s 0.6% advance and matched expectations of economists surveyed by The Wall Street Journal.

Wages and salaries rose 0.9%, and benefit costs—which include health coverage, retirement benefits and paid leave—advanced 0.4%.

From a year earlier, compensation increased 2.8% in the third quarter.

The increase was led by improving pay for private-sector workers. Wages and salaries, which account for about 70% of total compensation, rose 3.1% from a year earlier for private-sector workers. That was strongest year-over-year gain since the second quarter of 2008.

Total compensation for those workers increased 0.8% on the quarter and 2.9% from a year earlier.

State and local government employees’ compensation increased 0.8% on the quarter and was up 2.5% from a year earlier.

The unemployment rate fell to 3.7% in September, the end of the third quarter. That was the lowest jobless reading in 49 years. Combined with steady hiring, that appears to be putting workers in a position to command better compensation.

Worker compensation is now rising at faster pace than prices. The consumer-price index rose 2.3% from a year earlier in September, the Labor Department said.

The divergent data sends a mixed signal. Many economists view wage growth as a precursor to broader inflation pressures, but recent data shows broader inflation is cooling. That could give consumers confidence that they’re in a good position to spend their raises.

A measure of U.S. consumer confidence, released Tuesday, rose in October to a nearly two-decade high. The Conference Board, which produces the gauge, attributed the positive assessment to a strong labor market.

Write to Eric Morath at [email protected] and Sharon Nunn at [email protected]

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