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Economic Report: U.S. labor cost rose by 1.3% last quarter, biggest increase in at least 20 years

The numbers:  The cost of employing the average U.S. worker rose 1.3% in the third quarter, according to a closely followed measure of labor costs. Economists polled by The Wall Street Journal had forecast a 0.9% increase.

Compensation grew 3.7% over the past 12 months, based on unadjusted data.

What happened: Wages — some 70% of employment costs — increased 1.5% after rising 0.7% in the second quarter, the Labor Department said Friday. 

Over the past 12 months, wages have risen by 4.2% while overall inflation measured by the Consumer Price Index is up more than 5%. 

Benefits rose 0.9% in the third quarter — a 2.5% increase over the past 12 months.

Big picture: In the face of widespread labor shortages, employers are increasing wages and offering more benefits to recruit more workers.

There are some 10.4 million job openings in the U.S. while some 7.7 million Americans are unemployed.

Market reaction: Stocks
DJIA,
+0.68%
,

SPX,
+0.98%

were set to open lower on Friday.

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