Nearly a decade after the end of the Great Recession, wage growth for American workers has finally broken through 3 percent, a symbolically significant milestone that has fueled optimism for workers but worry on Wall Street that higher labor costs could combine with trade-related cost increases — and cut into companies’ record-setting profits.
The October jobs report showed the economy added 250,000 jobs last month, blowing past the 190,000 that economists had predicted. The top line unemployment rate of 3.7 percent — unchanged from last month — was in line with expectations.
“This is a really strong report. It’s firing on all cylinders,” said Josh Wright, chief economist at iCIMS, a hiring software company.
For the month, worker pay rose by 5 cents to $27.30, a 3.1 percent increase on an annualized basis and the biggest jump in wages since April 2009.
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“We're finally seeing wage growth pick up for more workers over the last few months and it's an upward trend I expect to see continue in the coming months if the economy remains on track,” said Andrew Chamberlain, chief economist at Glassdoor.
Chamberlain said that Glassdoor’s Local Pay Reports indicated a 2.4 percent increase in October for workers across the board, but added that demand for high-tech talent in cities like New York, San Francisco, and Washington is driving gains that exceed the national average.
Wright said the strong growth in wages was even more remarkable in light of the fact that the average work week increased in October, as well. “I’m impressed they were able to maintain that strength,” he said. “The fact that the hourly rate rose means it really was a strong pay month.”
Overall, labor market experts agreed that October’s report marked a shift in the kind of metrics that have characterized much of the labor market recovery. “This is a very unique situation we’re in,” said Michael Stull, senior vice president of ManpowerGroup North America. “Two big pieces we look at — one is wage growth, the second is the participation rate — those really haven’t moved in significant fashion the way we’d expect them to move,” he said.
ManpowerGroup’s fourth-quarter Employment Outlook Survey found that 22 percent of companies surveyed expect to grow their head count, while 5 percent expect to shrink their workforce. “We still see hiring in general as remaining pretty positive. Certainly, this time of year it gets even tighter,” Stull said.
That was borne out in positive results elsewhere, as well. ADP’s private-sector jobs report published Wednesday also indicated positive momentum with a gain of 227,000 jobs. Midsize and large companies were responsible for much of the growth.
And Wright said iCIMS’s visibility into the hiring pipeline indicated that the positive momentum is likely to continue. “According to our data there’s a spike in job openings in the past month,” Wright said.
The mentality among employers, he said, seems to be “get while the getting’s good in terms of hiring people to meet the demand.”