Title: US Workers’ Compensation Growth Exceeds Expectations in Q3, Revealing Resilient Job Market
Total compensation for workers in the United States experienced a stronger-than-anticipated increase during the third quarter, indicating the ongoing strength of the job market, according to the latest data. The Employment Cost Index, a widely-used measure of compensation, rose by 1.1% in Q3, surpassing the 1% gain witnessed in the previous quarter.
The main driver behind this increase was a growth in wages, which expanded by 1.2% between July and September. This rise in wages contributed to the overall growth in compensation, although benefits growth remained unchanged during the period.
However, compared to the same period the previous year, the growth in wages and benefits in Q3 was slower, at 4.3% as opposed to the 4.5% growth witnessed in Q2 and the 5% rate in Q1. Despite this deceleration, experts argue that the figures still reflect the resilience of the job market, which has maintained its strength despite the presence of high interest rates.
The job market’s robustness is particularly notable when considering an analysis conducted by ZipRecruiter. The analysis revealed that consumer prices increased at a faster rate than private-sector wages from Q1 2020 to Q3 2021. Furthermore, the analysis showed that compensation growth for production workers outpaced consumer prices, while pay growth for service workers remained lower.
Notwithstanding the current positive trend, economists predict that hiring and overall growth may slow down in the upcoming months due to higher borrowing costs, stricter lending standards, and a possible government shutdown. To address the challenges posed by inflation, the Federal Reserve is considering one more interest rate hike this year, while still expected to maintain interest rates at their current level during the upcoming policy meeting.
The Fed’s assessment of wage growth’s impact on inflation takes into account the critical factor of productivity data. Wage growth can coexist with low inflation if productivity remains strong. In Q2, US labor productivity experienced a notable increase of 3.5%, its largest gain in almost three years. Experts believe this upward trend is expected to continue as workers stay in their jobs for longer durations.
While productivity data can be subject to volatility and revisions, its significance remains undeniable in determining the correlation between wage growth and inflation. As the job market continues to show resilience, the relationship between wages and inflation will remain crucial in assessing the economy’s stability and overall performance.
In conclusion, the recent data on compensation growth for US workers demonstrates the ongoing strength of the job market. Despite challenges such as high interest rates, the market has remained resilient, with wages experiencing steady growth. However, economists anticipate potential slowdowns in hiring and growth in the near future, emphasizing the need for productivity and inflation considerations.
