Workers are earning more in a tight labor market

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Wages and salaries, which account for 70 percent of employment costs, jumped 0.9 percent in the third quarter after climbing 0.5 percent in the prior period. The jobs market is viewed as being close to or at full employment, with the unemployment rate at a near 49-year low of 3.7 percent. With unemployment at 3.7 percent, the uptick in wage growth suggests that businesses are ramping up efforts to expand their payrolls with greater compensation.The ADP national employment report, also released Wednesday, showed private businesses adding 227,000 jobs in October, beating economists' expectations for an increase of 189,000.

"The report shows a booming USA economy with a sufficient whiff of wage inflation to keep the Fed on track to raise rates in December and at least twice next year", said David Kelly, chief global strategist at JPMorgan Funds in NY. The rate was actually 7.5 percent in September, when counting people who sought a job in the past year and also those with part-time jobs in want of a full-time one.

"Broadening wage pressures across industry groups and across the pay scale are helping to drive sustained gains in wages for workers", said Ellen Zentner, chief economist at Morgan Stanley in NY.

The increase was led by improving pay for private-sector workers. They were up 3.1 percent in the 12 months through September, the biggest increase since the second quarter of 2008.

The prospect of interest rates rising faster than financial markets anticipate has roiled the USA stock market and a strong report on Friday could renew selling on Wall Street.

When adjusted for inflation, wage increases were higher in 2015 and 2016 than they are now, according to the Employment Cost Index.

Last month, employment in the leisure and hospitality sector likely rebounded after declining by 17,000 jobs in September, the first drop in year.

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President Donald Trump has taken credit for the strong economy and frequently likes to tout low unemployment and solid job growth when he is on the campaign trail ahead of the midterm elections.

Economists polled by Reuters had forecast payrolls would increase by 190,000 jobs in October and the unemployment rate would be unchanged at 3.7 percent.

"It's not about the tax cuts".

The employment-to-population ratio rose to 60.6 percent, the highest since January 2009, from 60.4 in September.

Payrolls increased by 134,000 in September.

Construction companies hired 30,000 more workers in October. Washington also has imposed tariffs on products from other trading partners, including the European Union, Canada and Mexico, prompting retaliation. In a separate report on Friday, the Commerce Department said the trade gap increased 1.3 percent to $54.0 billion in September, widening for a fourth straight month.

"Going forward, data on inflation will be critical for the Fed", Ryan Sweet, director of real-time economics at Moody's Analytics, said.

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