October’s Hourly Earnings More Closely Watched Than Jobs

When the US Labor Department releases its monthly jobs report this morning, one number will be of special interest to economists as it should be to comp specialists, too: The average hourly earnings.

The expectation by many economists is that the report will show hourly earnings rose between  3% and 3.1% in October.

While monthly earnings matter, they don’t typically make headlines the way changes in the unemployment rate and the number of jobs created — or lost — do. But coming on the heels of Wednesday’s Employment Cost Index, this morning’s report will add to the mounting evidence that wages are finally accelerating. The ECI report said wages and salaries grew at an annual rate of 3.1% for private sector workers through the end of September. It was the largest pay increase in a decade and represented a significant acceleration from September 2017, when pay grew at 2.6%.

Since the Great Recession, wage growth was largely stagnant, hovering around 2%, often just under. Even as employers began exhausting the ready supply of unemployed workers, wages crept up only slightly, puzzling economists who expected faster pay growth based on simple supply and demand. With the latest Cost Index report, their predictions may finally be coming true.

CNBC quoted a client note by Michael Pearce, senior U.S. economist at Capital Economics, in which he said, “The employment cost index data adds to the broader evidence that wage growth has continued to trend gradually higher over recent quarters. And with labor market conditions still tightening, we expect wage growth will accelerate further from here.”

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Today’s report from the Bureau of Labor Statistics, released at 8:30 a.m. on the East coast, will be part of that broader evidence pointing to where wages are going. Although a single month’s change is far from enough to declare a trend, taken with the ECI data, it will help point to what employers are likely to see in the way of compensation expense in the coming months.

In addition to the hourly wage changes, the report is expected to show employers added about 190,000 to 195,000 new jobs. Unemployment is forecast to remain at 3.7%.

John Zappe is the editor of TLNT.com and a contributing editor of ERE.net. John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.


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