Slower wage growth curbs US labor costs in third quarter

What happened

US labor costs rose 0.8% in the third quarter after a 0.9% increase in the prior quarter, as wage growth slowed. Over 12 months through September, labor costs rose 3.4%, the same as the year through June.

Confirmed

Global impact / market context

Slower wage growth means companies face smaller increases in payroll costs, which can support profit per sale. The Federal Reserve watches this measure because steady labor costs reduce pressure on consumer prices, though inflation remains elevated from energy and fertilizer costs tied to the US-Israeli war with Iran and an AI investment boom.

Analyst inference

The Federal Reserve kept its benchmark overnight interest rate in the 3.75%-4.00% range while saying inflation remains elevated, and economists expect a rate increase in December. Rising borrowing costs would raise interest expenses for companies and households, making hiring and capital spending more expensive.

Analyst inference

What to watch

1. The Federal Reserve left its benchmark overnight interest rate in the 3.75%-4.00% range and said inflation remains elevated. Confirmed
2. Economists expect the US central bank to raise borrowing costs in December, which would increase interest expenses for companies that rely on borrowed money. Proposed
3. Watch whether energy and fertilizer costs from the US-Israeli war with Iran keep consumer inflation high, as that could push the Fed to raise rates and weigh on hiring and capital spending. Analyst inference

Evidence

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