Wages and salaries for U.S. civilian workers rose 3.1 per cent in the 12 months to September, down from 3.5 per cent a year earlier, the Bureau of Labor Statistics said on Friday 30 October. Consumer prices rose faster, so pay fell 0.6 per cent after inflation.
Pay is slowing while prices are not. Underneath, employers are spending more of each compensation dollar on benefits, and on health insurance in particular.
What is the Employment Cost Index?
It is the government's quarterly measure of what employers pay for labour, in wages and in benefits. Unlike average hourly earnings in the monthly jobs report, it holds the mix of jobs fixed, so a wave of hiring in low-paid or high-paid work does not distort it. That makes it a cleaner gauge of the wage pressure the Federal Reserve is trying to judge.
The September release covers the third quarter. Total compensation for civilian workers rose 0.8 per cent in the three months to September, seasonally adjusted, after 0.9 per cent in the three months to June.
How much did pay rise?
Less than a year ago, and less than prices. The table sets out the 12-month changes.
| 12 months to September | 2025 | June 2026 | 2026 | 2026, after inflation |
|---|---|---|---|---|
| Civilian total compensation | 3.5% | 3.4% | 3.4% | -0.4% |
| Civilian wages and salaries | 3.5% | 3.2% | 3.1% | -0.6% |
| Civilian benefits | 3.5% | 3.8% | 3.9% | +0.1% |
| Private wages and salaries | 3.6% | 3.1% | 3.1% | -0.6% |
| State and local government wages | 3.5% | 3.4% | 3.2% | -0.5% |
| Private health benefits | 6.1% | 6.0% | 6.4% | n/a |
Source: Bureau of Labor Statistics, Employment Cost Index, September 2026. Current-dollar changes are not seasonally adjusted.
The quarterly pace gives a slightly firmer reading. Private wages rose 0.8 per cent in the three months to September, which compounds to about 3.2 per cent a year, by this publication's arithmetic. Civilian wages rose 0.7 per cent, or about 2.8 per cent annualized. Neither pace keeps up with the 3.7 per cent rise in consumer prices in the year to September, reported earlier this month.
Why are benefits rising faster than wages?
Mostly health insurance. Private employers' health benefit costs rose 6.4 per cent over the year, up from 6.0 per cent in the year to June, the bureau said. Total private benefits rose 3.9 per cent, 0.8 points faster than private wages.
For workers, that matters in a way the headline hides. A rising share of what an employer spends on a job goes to the insurer rather than to the paycheck. Benefits are the only line in the table that grew faster than prices, by 0.1 per cent for civilian workers. That is our reading of the bureau's split, not a measure of what any worker takes home.
Who did better?
Union members. In private industry, union workers' wages rose 4.3 per cent over the year, against 3.0 per cent for nonunion workers, a gap of 1.3 points. Union benefits also rose 4.3 per cent.
State and local government workers fell back. Their wages rose 3.2 per cent, down from 3.4 per cent in the year to June, and their total compensation rose just 0.6 per cent in the latest three months, after 1.0 per cent.
Employers who have been struggling to find factory workers might expect to bid pay up faster. The index does not show that happening across private industry as a whole.
What does it mean for the Fed?
It cuts both ways. The Federal Reserve held its benchmark rate at 3.75 to 4 per cent on 28 October, with two officials voting for an increase, and core PCE inflation, its preferred gauge, ran at 3.1 per cent in September, as this publication reported on Thursday. Wages rising at about the same 3.1 per cent do not look like a wage-price spiral. They also show no sign that the labour market is pushing inflation down.
What to watch
The bureau will publish the December index on 29 January 2027. With that release it will update its employment weights and stop counting workers' compensation insurance costs, so comparisons across that date will need care. Before then, the Fed meets on 8-9 December. If health costs keep rising at more than 6 per cent while wages hold near 3 per cent, the split between the paycheck and the benefits line will widen further, whatever the Fed decides.
All Employment Cost Index figures, including the three-month and 12-month changes, the real changes, health benefits, union and nonunion figures, the coming methodology change and the next release date, are from the Bureau of Labor Statistics Employment Cost Index release for September 2026, published on 30 October 2026. The consumer price figures are from the Bureau of Labor Statistics CPI release for September 2026, as reported by this publication on 14 October. The Federal Reserve's decision and the core PCE figure are from the Fed's statement of 28 October and the Bureau of Economic Analysis release of 29 October 2026, as reported by this publication on 29 October. The annualized rates and the gaps between series are this publication's arithmetic. The analysis is our own.
Topics moneyBureau of Labor Statisticsinflationhealth insuranceunionslabour marketFederal Reserve
