More positive economic news: Wages grow 3.1 percent in third quarter; NFIB reports demand for employees outstrips supply

The Labor Department reports a good bump in wages and salaries in the third quarter. From the CNBC story:

Wages and salaries rose 0.9 percent, well ahead of expectations for 0.5 percent. Benefit costs were up 0.4 percent.

On a yearly basis, wages and salaries jumped 3.1 percent, the biggest increase in 10 years.

As has often been commented upon, improvements in wage and salary compensation have been slow in recent years, despite the strong growth in the economy. With unemployment at its lowest rate since 1969, the overdue catchup may finally be taking place.

“The employment cost index data adds to the broader evidence that wage growth has continued to trend gradually higher over recent quarters,” Michael Pearce, senior U.S. economist at Capital Economics, said in a note. “And with labor market conditions still tightening, we expect wage growth will accelerate further from here.”

Appearing to confirm the trend, NFIB reports small businesses demand for labor continues to grow.

A seasonally adjusted 16 percent of small business owners reported increasing employment an average of 3.3 workers per firm and 11 percent reported reducing employment an average of 2.9 workers per firm, according to NFIB’s monthly jobs report, released today. Job creation remained solid in October for small businesses at a net addition of 0.15 workers per firm…

A seasonally-adjusted net 22 percent of owners plan to create new jobs, four points below August’s record high but still exceptionally strong historically. Twenty-two percent plan to increase total employment at their firm, and six percent plan reductions.

However, 38 percent of all owners reported job openings they could not fill in the current period, equal to September’s record high. Sixty percent of owners reported hiring or trying to hire with 88 percent of them reporting few or no qualified applicants for the positions they were trying to fill.

In addition to slow wage growth, the recent economic expansion has been associated with relatively low gains in productivity. And, again, there are signs that may be changing, if haltingly. The Associated Press reports,

U.S. productivity grew at an annual rate of 2.2 percent in the third quarter, a slowdown from the previous quarter but still better than the lackluster gains of the last decade…

The rise in productivity in the July-September period followed a 3 percent rate of increase in the second quarter, which had been the strongest figure in three years…Productivity, the amount of output per hour of work, has been weak throughout the current recovery that began in June 2009.

Taken together, the growth in compensation and productivity plus the heightened demand for qualified workers underscore an unprecedented expansion of economic opportunity. As we’ve reported before, citing the work of the Washington Roundtable, Association of Washington Business, and Washington Research Council, to capitalize on these opportunities workers will need training and education beyond a high school diploma. That can include apprenticeships, professional and trade certifications, college coursework or four-year degrees. But, in the words of the Roundtable, “the credential is essential.” It’s been a long time since the employment marketplace looked this good.