Wage Growth Rises at Fastest Rate in Nearly Ten Years

Last week’s economic news showed consumer confidence reaching a sudden 18-year high, lending hope to the possibility of continued economic expansion. Also, worker productivity grew only slightly in October, thanks in part to employers’ need to hire lower-skilled workers. On Friday, the Labor Department announced job growth far exceeded expectations, unemployment held constant, and wage growth also increased.

• U.S. consumer confidence reached an 18-year high in October, driven mostly by a strong labor market, suggesting economic demand could continue through the near-term. The Conference Board’s monthly consumer confidence index rose to 137.9, up from 135.3 in September and beat economists’ expectations of 136.0. The positive outlook by consumers indicates that the mature economic expansion will continue into 2019 on rising consumer spending and demand.

• Worker productivity grew only slightly in the third quarter despite strong economic growth and low unemployment. Output per hour for non-farm workers rose 1.3% annually in the third quarter, marking the eighth straight year of growth below 2%. Slower worker productivity growth may translate into slower economic growth in the future. Further, historically low unemployment means that less skilled workers are being hired, potentially placing a further drag on productivity growth.
  

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• The U.S. labor market added 250,000 jobs in October, beating forecasts of 190,000, but the unemployment rate held constant at 3.7%, its fourth straight month under 4.0%, as 711,000 new workers joined the labor force. However, that is hardly the biggest news, as non-farm wages grew by their largest annual rate in nearly 10 years at 3.1% growth. The strong showing of wage growth in the Labor Department’s monthly report may be a sign of Fed-anticipated inflation coming soon.