Report: Worker pay rising at fastest pace in 10 years

Great news for the American worker.  Pay and benefits that stagnated during the Obama years rose at the fastest pace in ten years, according to the Economic Cost Index.


American workers are finally reaping the benefits of the lowest unemployment rate and best jobs market in decades: Wages and benefits are rising at the fastest pace in a decade.

The employment cost index rose 0.6% in the second quarter, a tick below the MarketWatch estimate of 0.7%.

More important, the cost of worker compensation in the form of pay and benefits edged up to 2.8% to mark the biggest yearly gain since mid-2008.

Wages make up 70% of the cost of doing business, and the increase reflects not only a tightening job market, but soaring business confidence as well.

Wages and compensation are going up because unemployment is way down.  The jobless rate has tumbled to an 18-year low of 4% after the hiring of millions of people in the past eight years.

More and more companies complain they cannot find enough skilled workers.  Firms have sought to fill openings by offering better benefits such as more vacation time or flexible hours.  When push comes to shove, they are offering higher pay.

While bigger paychecks are great for workers, the Federal Reserve is watching closely to see if rising compensation is stoking inflation.  The Fed could jack up U.S. interest rates if it becomes a big worry, but so far inflation remains relatively mild.

Inflation pressures are not coming from higher prices despite the increase in wages.  Certainly, competition has something to do with that.  The Fed will be watching prices closely, but at the moment, a spike in interest rates seems a remote possibility.

More than the tax cuts, the general business climate has created the perception that we are, indeed, experiencing good economic times and that with inflation largely tamed, the chances are good that growth will continue.

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