The strong jobs market is gradually putting upward pressure on compensation, with other data Wednesday showing a solid increase in labor costs in Q-3. That boosted the annual increase in wages to 3.1 percent, the biggest gain since April 2009, from 2.8 percent in September.
The smallest wage growth, 1.6 percent, was in natural resources, construction, and maintenance jobs.
"The strength in the ADP report supports our view that the underlying trend in the labor market remains upbeat", said Daniel Silver, an economist at JPMorgan in NY.
USA companies added jobs in October at the healthiest pace in eight months, and wages rose by the most in a decade, the latest evidence of the durable strength of the US job market.
Employment gains have averaged 208,000 jobs per month this year, double the roughly 100,000 needed to keep up with growth in the working-age population.
A separate report Wednesday showed businesses added 227,000 jobs in October, a sign that businesses can still find workers even with the unemployment rate striking 49-year lows.
Nonfarm payrolls increased by 250,000 jobs last month as employment in the leisure and hospitality sector bounced back after being held down by Hurricane Florence, which drenched North and SC in mid-September. "This is about the gradual tightening in the labor market finally forcing employers to pay more", said Ian Shepherdson, chief economist at Pantheon Marcoeconomics. Government payrolls are expected to have increase by 7,000 jobs in October.
For state and local government workers, the figures are the same, but switched, with wages growing by 2.5 percent and benefits by 3.1 percent. There are a record 7.1-M job unfilled openings in the economy. Businesses are staffing up at a rapid pace in response to healthy consumer spending and strong economic growth. It is also considered a better predictor of core inflation.
Fed Chairman Jerome Powell is expected to approve another rate hike in December.
But benefits for all workers increased only 0.4 percent in the July-September quarter after rising 0.9 percent in the second quarter. Payrolls rose by 134,000 jobs in September, the smallest gain in a year, after Hurricane Florence drenched North and SC, weighing on restaurant and retail employment.
Some economists said Fed officials were likely to view the low unemployment and rising wages as modestly inflationary. The services sector did the most hiring, with the biggest expansion coming in trade, transportation, and utility companies.
Some have argued that companies were holding off on increasing wages because they were having to put more money toward benefits, but the Employment Cost Index also tracks benefits costs, and those have not risen as much as wages.
Information for this article was contributed by Heather Long of The Washington Post; by Christopher Rugaber of The Associated Press; and by Shobhana Chandra of Bloomberg News.
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