US employment costs rise 0.8% in the third quarter as real wages remain under pressure

AI-generated illustration of compensation and living costs; it is not a news photograph and does not represent actual survey participants or data.

The US Bureau of Labor Statistics (BLS) reported on October 30 that the Employment Cost Index for private industry and state and local government combined rose 0.8% on a seasonally adjusted basis in the three months ending September 2026. Wages and salaries increased 0.7%, while benefit costs rose 0.9%. Over the preceding twelve months, on a non-seasonally adjusted basis, total compensation costs increased 3.4%, wages and salaries rose 3.1%, and benefit costs increased 3.9%. Quarterly changes and twelve-month changes are not interchangeable; a 3.9% increase in benefit costs does not mean workers’ take-home pay rose by the same amount.¹

Nominal wage gains and pressure on purchasing power

In private industry, total compensation costs rose 0.8% over the three months. Wages and salaries increased 3.1% over twelve months but fell 0.6% after adjustment for inflation. For state and local government workers, nominal wages and salaries increased 3.2% from a year earlier, while the inflation-adjusted measure declined 0.5%. These indicators measure changes in employers’ hourly labor costs, not the average pay each employee actually receives. Nor do they establish, on their own, whether employment has risen or fallen. The combined measure above excludes federal government employees.¹²

Methodology changes and comparisons over time

The Employment Cost Index tracks a relatively fixed occupational and industry mix, reducing the influence of changes in employment composition on wage comparisons. BLS has announced that, when it releases December 2026 data in January 2027, it will replace the existing 2021 fixed employment weights with 2025 weights and remove workers’ compensation costs from the index calculation. Comparisons spanning this methodological change will therefore require attention to the methodology notes: a change in statistical coverage should not automatically be interpreted as a change in wage trends.²³

The figures show rising employer costs alongside pressure on workers’ real purchasing power. These outcomes are not contradictory. Higher nominal compensation means higher payment costs, while falling real wages mean that the corresponding wage increases did not offset price changes. Assessing labor-market conditions still requires evidence on hiring, hours worked, job vacancies and prices, rather than relying solely on nominal compensation growth.

Source notes

1. US Bureau of Labor Statistics, October 30, 2026, Employment Cost Index Summary — September 2026, release USDL-26-1620: original release and tables. The data cover the three and twelve months ending September 2026; the former are seasonally adjusted and the latter are not. ↩ ↩²

2. US Bureau of Labor Statistics, Employment Cost Index: indicator and release resources. The page has no fixed publication date; accessed October 31, 2026. ↩ ↩²

3. US Bureau of Labor Statistics, updated February 11, 2026, Introducing 2025 fixed employment weights and removing Workers’ Compensation costs from the Employment Cost Index (ECI): methodology change notice. ↩