For the past several years, economists wondered why unemployment continued to drop without a corresponding increase in wages. That trend has finally disappeared, according to a new report from the Department of Labor, and it couldn’t have come at a better time for the Trump administration. Wages grew faster than expectations in the past month, and had the biggest gain over the past year in a decade:
The Labor Department’s employment cost index rose 0.8 percent for the period, ahead of the estimate of 0.7 percent from economists surveyed by Refinitiv.
Wages and salaries rose 0.9 percent, well ahead of expectations for 0.5 percent. Benefit costs were up 0.4 percent.
On a yearly basis, wages and salaries jumped 3.1 percent, the biggest increase in 10 years.
Wage increases have been the missing link in the economy since the recovery began in mid-2008. Average hourly earnings have been rising steadily but have stayed below the 3 percent level as slack has remained in the labor market.
At the same time, ADP released its monthly projections for private-sector job creation, showing a burst of 227,000 jobs added. That beat projections among economists that had predicted a level almost 50,000 jobs lower:
Private sector employment increased by 227,000 jobs from September to October according to the October ADP National Employment Report®. Broadly distributed to the public each month, free of charge, the ADP National Employment Report is produced by the ADP Research Institute® in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. …
“Despite a significant shortage in skilled talent, the labor market continues to grow,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.”We saw significant gains across all industries with trade and leisure and hospitality leading the way. We continue to see larger employers benefit in this environment as they are more apt to provide the competitive wages and strong benefits employees desire.”
Mark Zandi, chief economist of Moody’s Analytics, said, “The job market bounced back strongly last month despite being hit by back-to-back hurricanes. Testimonial to the robust employment picture is the broad-based gains in jobs across industries. The only blemish is the struggles small businesses are having filling open job positions.”
Keep in mind, though, that ADP routinely comes in a little on the optimistic side. They missed last month by a mile, predicting an expansion of 216K while the September report only came in at 134K. Still, the pace of the economy has barely slowed at all, having had two successive quarters of 4.2% and 3.5% of annualized GDP growth. Friday’s official job report from the Bureau of Labor Statistics seems more likely than not to reflect that, even if perhaps not to the same extent as ADP’s.
Needless to say, all this data makes for a fine closing argument for the midterms, as I wrote yesterday: Do you want to stay the course, or go back to mediocrity? So far, the GOP and Donald Trump haven’t been disciplined enough to stay on that message, however, and early voting means there are fewer opportunities to make that sale. From here until Election Day, Republicans should always be closing on their economy pitch, which will have greater traction in the center than among those who are already motivated on hot-button issues like immigration.
Remember — in this case, second place won’t even get you the set of steak knives: