Wells Fargo Reports: Employment Costs Rising Steadily

Total employment costs rose 0.6 percent for a third consecutive quarter on moderate gains in both the wages & salaries and benefits components. The trend in employment costs remains gradually upward.

Moderate Gains in Wages & Benefits

• Employment costs rose another 0.6 percent in the third quarter, keeping the year-over-year change at 2.3 percent.
• Compensation growth slowed a touch in the private sector, increasing 0.5 percent. Wage growth was a tad weaker, bringing the 12-month change down to 2.4 percent. Benefit costs picked up slightly, but is still running below wages as the mix of private compensation has shifted away from benefits.

Ex-Incentive Paid Workers, Clearer Firming Trend

• Excluding incentive paid occupations, which provides a better indication of the underlying trend of wage pressures, wages & salaries are up 2.4 percent over the past year, the strongest pace of the expansion.

·  Lackluster productivity growth indicates that even the modest pickup in employment costs over the past year is adding pressure to margins and, if passed on, would support higher inflation.