The numbers: The cost of employing the average U.S. worker rose 1.3% in the third quarter, according to a closely followed measure of labor costs. Economists polled by The Wall Street Journal had forecast a 0.9% increase.
That’s the highest quarterly increase in at least the 20 years for which records have been kept.
Compensation grew 3.7% over the past 12 months, based on unadjusted data.
What happened: Wages — some 70% of employment costs — increased 1.5% after rising 0.7% in the second quarter, the Labor Department said Friday.
That exceeds inflation which rose 1.2% over the third quarter, measured by the Consumer Price Index.
Over the past 12 months, wages have risen by 4.2% while CPI inflation is up more than 5% for the past 12 months.
Benefits rose 0.9% in the third quarter — a 2.5% increase over the past 12 months.
Big picture: In the face of widespread labor shortages, employers are increasing wages and offering more benefits to recruit more workers.
There are some 10.4 million job openings in the U.S. while some 7.7 million Americans are unemployed.
What they’re saying: “It is hardly surprising that employers are having to pay up given the shortage of qualified labor at the moment,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez.
Until more Americans go back to work and labor force participation rates near pre-pandemic levels “it will continue to be a ‘seller’s market’ for labor, and compensation costs will likely continue to rise,” he said in a note.
Andrew Hunter, an economist at Capital Economics, said the report “suggests that inflationary pressures are rapidly getting out of control.”
Market reaction: U.S. stocks
were set to open lower on Friday.