Shoppers will have more money in their pockets this holiday season.
Wages grew 3.1 percent over the past year, the fastest pace in close to a decade, according to October jobs data from the Bureau of Labor Statistics. This was the first time that pay growth broke through 3 percent since the recession and fueled hopes among retailers for ramped up holiday spending.
“The dual effects of increased jobs and higher wages set in motion households’ ability and presumed willingness to spend,” National Retail Federation chief economist Jack Kleinhenz said.
While unemployment tumbled over the past year — it remained at a 49-year low of 3.7 percent in October — and the economy went from strength to strength, pay has been lagging — until now.
That’s because companies are now trying to stand out to prospective workers amid an extremely tight labor market where vacancies top 7 million, surpassing the number of those actively seeing work.
Economists expect this trend to continue as companies battle it out for seasonal workers. Amazon gave itself a head start this week, pushing up its minimum wage from $11 to $15.
Stephen Stanley, an economist at Amherst Pierpont Securities, said: “Having finally reached 3 percent, the year‐over‐year wage gain will not fall below that level again — for even one month — for several years.”
As for job gains last month, private employers hired 250,000 workers, topping Wall Street expectations for 188,000 as companies that delayed hiring in September due to Hurricane Florence made up for it last month.
Retail employment, excluding automobile dealers, gasoline stations and restaurants, fell by 900 positions, although that masked a 1,500-job drop in department stores and a modest 300-job decline in clothing and accessories stores. Fashion specialty stores employed 1.4 million last month while department store payrolls tallied 1.2 million.
The largest gains were in transportation and warehousing as retailers gear up for the holiday season. This category added almost 25,000 jobs last month, including 8,000 couriers and messengers and 8,000 in warehousing and storage.
Payrolls in this sector have risen by more than 20,000 for three straight months, the first time this has happened since records began in the Seventies, while over the year, employment in transportation and warehousing has surged by 184,000 jobs.
The positive jobs report did little to dispel widespread belief that the Federal Reserve would hike interest rates again next month despite criticism from President Trump. This would mark the fourth rise this year and the ninth since it started lifting rates, which had been held at crisis-induced record low levels for several years. The Federal Reserve has previously said more are planned next year.
“All the key elements of the employment report support another interest rate hike from the Fed in December,” according to Paul Ashworth, chief U.S. economist at Capital Economics.