Labor Dept. figures show rising wages -- and possibly soon, inflation

Contractors work on townhouses under construction in Milpitas California U.S. on Thursday Oct. 25 2018. MUST CREDIT Bloomberg

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 US central bank signal an increase in December.

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

Wages and salaries were up 2.9 percent in the 12 months through September, according to data released Wednesday by the Department of Labor.

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.

Employers, scrambling to find qualified workers, are boosting wages.

Last month, employment in the leisure and hospitality sector likely rebounded after declining by 17,000 jobs in September, the first drop in year. "Testimonial to the robust employment picture is the broad-based gains in jobs across industries".

With 3.7 percent unemployment, some economists view the jobs market as being close to or at full employment. "This is about the gradual tightening in the labor market finally forcing employers to pay more", said Ian Shepherdson, chief economist at Pantheon Marcoeconomics.

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Payrolls increased by 134,000 in September.

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. The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack. There are a record 7.1-M job unfilled openings in the economy. Rising wages should help support consumer spending and soften the hit to the economy from a softening housing market and stalling business investment. In those years wages were only growing in a range of 2 percent to 2.5 percent a year, but inflation remained low.

Economists say his policies deserve some credit for triggering faster growth, but unemployment has been falling steadily for eight years and wages have been inching higher.

Prices also have been rising in the past year, especially for gas and rent, but wages are outpacing inflation by a significant margin. The gain was an increase from the second quarter's 0.6% advance and matched expectations of economists surveyed by The Wall Street Journal. 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. The U.S. central bank is expected to raise rates again in December. Most of the wage growth in the Employment Cost Index is coming from service-sector jobs.

Wages and salaries make up roughly 70 percent of compensation costs for USA firms, while nonpay benefits take the other 30 percent.Wage growth slowed substantially after the great recession and has lagged behind the massive growth in U.S.jobs and equity markets throughout the recovery.

Information for this article was contributed by Heather Long of The Washington Post; by Christopher Rugaber of The Associated Press; and by Shobhana Chandra of Bloomberg News.

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