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Wages and benefits barely grow, but consumer spending jumps

A labor market flooded with unemployed workers continued to keep a lid on wages and benefits in the last three months, even as consumers ramped up spending.

Wages and salaries grew just 0.3% in the third quarter this year from the previous quarter, according to a government employment cost index. Benefits increased 0.1%, the slowest growth rate since 1999, according to employment cost data released Friday by the U.S. Labor Department’s Bureau of Labor Statistics.

“This report matches well with the picture of a U.S. economy slowly treading forward and employment making sloth-like progress,” Gregory Daco, principal U.S. economist for IHS Global Insight, wrote in a note.

“With the unemployment rate at 9.1%, ongoing labor market slack should continue to put downward pressure on employment costs,” he said.

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Stagnant wage growth is good news for employers but bad news for workers: Real disposable household income fell 1.7% in the third quarter. That’s the biggest drop since the third quarter of 2009, Daco said.

Despite the moribund income levels, people are spending again.

Consumer spending in September rose a surprising 0.6%. The savings rate dropped last month to 3.6% of after-tax income. That’s the lowest level since 2007; the savings rate was 5% to 6% during most of the last two years.

For the fiscal year that ended Sept. 30, total compensation — which includes benefits — grew 2% from the previous year. Wages and salaries grew 1.6%, while benefits rose 3.2%, according to the bureau’s data.

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Overall, annual compensation was dragged down by flat salaries for state and local government workers. Their pay and benefits increased just 1.5% over the year and were flat over the quarter, the slowest growth since the government started collecting such data in 1982. Government benefits rose just 0.3% in the third quarter from the previous quarter — the slowest growth since at least 2001, and well below quarterly increases in the early part of the decade.

“State and local government is in the process of a fundamental restructuring which has already taken place in most of the private sector,” said David Shulman, senior economist at the UCLA Anderson forecast.

The data came a day after California Gov. Jerry Brown put forward a plan to reform the state’s pension system that includes raising the retirement age for most future public workers from 55 to 67.

The private sector didn’t do much better.

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Compensation grew just 0.4% in the quarter, after rising 0.8% the previous quarter. It grew fastest in financial and insurance services and in installation and repair. It fell 5.6% in aircraft manufacturing and dropped 0.1% in administration and support.

Total compensation for the year grew the fastest in the Detroit area — 4.9% from the same period last year. It rose just 1.9% in the Los Angeles area and 2.9% in the Phoenix area.

Excluding benefits, wages and salaries grew the fastest in the Minneapolis region over the year, 2.5%, followed closely by Boston and Houston.

Annual wages and salaries grew the slowest in Los Angeles, at 1.3%, and Atlanta, at 1.2%.

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Some unemployed workers said they would rather have a low-paying job than no job at all. Trained as a welder, Jecenia Rodriguez of Dos Palos, in the Central Valley, has been out of work for two years and has become accustomed to applying for minimum-wage jobs.

“I’ll do anything, as long as it’s legal,” she said.

alana.semuels@latimes.com

don.lee@latimes.com


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