Economy

Employment Costs Rising Handily With Stronger GDP

We have already seen a positive reading of 3.0% growth in gross domestic product (GDP) for the third quarter of 2017. We also have seen the strength confirmed in strong durable goods orders and strong consumer spending. Now the market is getting to see that the employment costs are rising simultaneously.

The Bureau of Labor Statistics (BLS) has released its Employment Cost Index for the third quarter of 2017. Wages rose handily in the third quarter, but other employment-related costs drove the gains as well. With such low unemployment and a very tight labor market, there may be enough here to stir the continued debate about whether inflation is heating up too much.

Employment costs rose by 0.7% seasonally adjusted in the third quarter, up from 0.5% in the second quarter. Reuters and Dow Jones were both calling for a 0.7% gain. Where the numbers start to stand out is in the annualized gains over the third quarter of 2016: up 2.5% for wages and employer costs for health benefits increased 1.1% for the 12-month period ending in September 2017.

This report details the changes in labor-associated costs for businesses in the United States. Wages and salaries account for about 70% of compensation costs, and benefits make up the other 30% of the index. The wages component was up 0.7%, and the benefits (driven by health care) increased by 0.8%.

The BLS noted that hurricanes Harvey and Irma had minimal impact on data collection in the September 2017 reference period.

Tuesday’s BLS data are not at all expected to influence the market direction. What it does do is confirm that employment costs and the cost of employee benefits are rising at the same time that GDP is coming in stronger than expected.

Want to Retire Early? Start Here (Sponsor)

Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?

Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.

Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.