US Employment Costs Rise 0.8% in Q3 as Benefits Outpace Wages
US employers’ compensation costs rose 0.8% in the third quarter, the Bureau of Labor Statistics said on 30 October, and benefit costs again rose faster than wages and salaries.
Pay growth is cooling faster than the full cost of employing a worker. Wages and salaries for civilian workers rose 3.1% over the 12 months to September, the slowest of the three annual readings in the release’s summary table. Benefit costs rose 3.9%. In The Edge’s reading, health benefits have become the accelerating part of US labor costs, which presses on employers’ margins without lifting workers’ spending power.
The quarterly figures are seasonally adjusted; the annual ones are not. The index tracks the cost of labor at fixed employment weights, so shifts in employment among occupations and industries do not move it.
Wages slow to 0.7% in the quarter while benefits rise 0.9%
Civilian compensation rose 0.8% in the three months to September, after 0.9% in each of the first two quarters of 2026. Wages and salaries rose 0.7%, down from 0.9% in the second quarter.
That 0.7% matches December 2025 as the smallest quarterly wage rise in the nine quarters the bureau’s table covers, back to September 2024. Annualized from the index levels, the quarter’s compensation increase works out at 3.2% and the wage increase at 3.0%, on The Edge’s calculation.
Benefit costs rose 0.9% in the quarter, after 1.0% in the second. They have outpaced wages in each of the three quarters of 2026 so far.
In private industry, compensation and wages each rose 0.8%. State and local government slowed more. State and local government compensation rose 0.6%, after 1.0% in the second quarter.
That was the smallest quarterly rise for state and local workers in the nine quarters shown, and their wages also rose 0.6%, another low for the period. Within state and local government, public administration compensation rose 0.5%.
Quarterly change in employment costs, seasonally adjusted (in %)
| Measure | Mar 2026 | Jun 2026 | Sep 2026 |
|---|---|---|---|
| Civilian compensation | 0.9 | 0.9 | 0.8 |
| Civilian wages | 0.8 | 0.9 | 0.7 |
| Civilian benefits | 1.2 | 1.0 | 0.9 |
| Private compensation | 0.9 | 0.9 | 0.8 |
| Private wages | 0.7 | 0.9 | 0.8 |
| State and local compensation | 1.0 | 1.0 | 0.6 |
| State and local wages | 1.0 | 0.9 | 0.6 |
Three months ended in the month shown. Civilian workers cover private industry and state and local government, excluding the federal government.
Benefits now outrun wages, and health benefit costs rise 6.4%
Over the 12 months to September, private industry benefit costs rose 3.9%, against 3.5% a year earlier. Private wages and salaries rose 3.1%, down from 3.6%.
The order has flipped. A year ago private wages were rising 0.1 percentage point faster than benefits; now benefits lead by 0.8 point.
Health benefit costs rose faster still. In private industry they rose 6.4% over the year, up from 6.0% in the 12 months to June. That is more than double the rise in private wages.
One industry ran far faster. In aircraft manufacturing, the fastest in the bureau’s benefits table, benefit costs rose 9.9% over the year, after 4.5% in the 12 months to September 2025.
In private industry, union benefit costs rose 4.3% over the year, from 3.9% a year earlier. Nonunion benefit costs rose 3.9%, from 3.4%. For state and local government workers, benefits rose 3.8%, the same pace as a year before.
Change over 12 months, not seasonally adjusted (in %)
| Measure | Sep 2025 | Jun 2026 | Sep 2026 |
|---|---|---|---|
| Civilian compensation | 3.5 | 3.4 | 3.4 |
| Civilian wages | 3.5 | 3.2 | 3.1 |
| Civilian benefits | 3.5 | 3.8 | 3.9 |
| Private wages | 3.6 | 3.1 | 3.1 |
| Private benefits | 3.5 | 3.8 | 3.9 |
| Private health benefits | 6.1 | 6.0 | 6.4 |
| State and local compensation | 3.6 | 3.6 | 3.5 |
Twelve months ended in the month shown; current dollars.
Adjusted for inflation, private wages are 0.6% lower than a year ago
The bureau’s constant-dollar series shows private wages and salaries down 0.6% over the 12 months to September. A year earlier the same measure was up 0.6%.
Civilian wages show the same 0.6% decline, and total civilian compensation in constant dollars is down 0.4%. State and local government wages fell 0.5% in real terms.
In the summary table, only benefits stayed positive after inflation: up 0.2% in private industry and 0.1% across civilian workers.
Change over 12 months in constant dollars (in %)
| Measure | Sep 2025 | Jun 2026 | Sep 2026 |
|---|---|---|---|
| Civilian compensation | 0.5 | -0.1 | -0.4 |
| Civilian wages | 0.6 | -0.3 | -0.6 |
| Private wages | 0.6 | -0.4 | -0.6 |
| Private benefits | 0.5 | 0.2 | 0.2 |
| State and local wages | 0.5 | -0.1 | -0.5 |
Inflation-adjusted, not seasonally adjusted, as published in the release’s summary table.
Union pay, utilities and the Pacific lead wage gains
Union workers in private industry saw wages and salaries rise 4.3% over the year, against 3.0% for nonunion workers. The gap is 1.3 percentage points.
Union wages jumped in the latest quarter: they rose 1.7% in the three months to September, not seasonally adjusted, after 1.0% in the second quarter. In union service-providing industries the quarterly rise was 1.9%.
Among the industries in the bureau’s private wage table, utilities led at 4.2% over the year, and hospitals and real estate followed at 3.8%. Accommodation and food services was lowest at 2.1%.
Several sectors slowed sharply. Wholesale trade wages rose 2.3%, from 4.0% a year earlier, and construction wages rose 3.0%, from 4.1%. Information went the other way, to 3.3% from 2.2%.
By occupation, sales and related workers had the slowest wage growth at 1.8%, down from 4.2% a year earlier. Service occupations slowed to 2.8% from 3.6%.
Across the nine census divisions, wage growth ranged from 1.9% in New England to 3.8% in the Pacific. The bureau notes that its union, nonunion and regional indexes are not strictly comparable with its aggregate, occupation and industry series.
Private wages and salaries by industry, change over 12 months (in %)
| Industry | Sep 2025 | Sep 2026 |
|---|---|---|
| Utilities | 4.1 | 4.2 |
| Hospitals | 3.8 | 3.8 |
| Real estate and leasing | 2.4 | 3.8 |
| Retail trade | 3.3 | 3.4 |
| Information | 2.2 | 3.3 |
| Manufacturing | 3.6 | 3.1 |
| Construction | 4.1 | 3.0 |
| Wholesale trade | 4.0 | 2.3 |
| Accommodation and food | 2.9 | 2.1 |
Twelve months ended in September, not seasonally adjusted. Real estate covers rental and leasing; accommodation and food covers food services.
New weights arrive with the December figures
This release is the last on the current basis. With the December 2026 data, due in January, the index switches to 2025 employment weights, replacing the 2021 weights it has used since December 2022.
It will also drop workers’ compensation costs, which the bureau puts at an estimated 1% of total compensation. The bureau cites a substantially lower item response rate for that benefit than for the other benefits it collects.
What to watch: Third-quarter productivity and costs on 5 November, the October jobs report on 6 November, and October consumer prices with real earnings on 10 November, each at 13:30 GMT. The December employment cost index, the first on the new weights, follows on 29 January 2027 at 13:30 GMT.
Method: figures are from the US Bureau of Labor Statistics release “Employment Cost Index, September 2026” and its tables, published 30 October 2026 at 12:30 GMT, and its notice on 2025 fixed weights; percentage point gaps, annualized rates, ratios and counts not attributed to a source are The Edge’s calculations.
Sources: US Bureau of Labor Statistics, The Edge.
