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Employee Compensation Growth Is Smallest in Nearly 30 Years

The total compensation paid by employers in the third quarter rose by the smallest amount since at least 1982 as employees paid for a greater portion of their health care and companies continued to sit on their record hoards of cash.

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The employee cost index grew just 0.26 percent from the previous quarter, according to data from the Bureau of Labor Statistics released Friday. Wages make up about 70 percent of compensation costs and benefits account for the rest of the index, which was started 30 years ago.

“Surely, employers are happy that their benefit costs are growing at a slower rate, but this likely comes at employees' expense,” said Jeffrey Greenberg, economist at Nomura Equity Research, in a note.

The fact that companies are unwilling to pay current employees more doesn’t bode well for the prospects of the unemployed .

The Labor Department's next jobs report, due out on Nov. 4, is expected to show the unemployment rate held steady at 9.1 percent in October, according to a consensus estimate from economists surveyed by StreetAccount.

“It should not be a surprise,” said David Fried, president of Fried Asset Management. “Employees simply have no pricing power.”

Meanwhile, the savings rate plummeted to 3.6 percent, the lowest in four years, according to separate data released Friday from the Commerce Department. That’s down from 5.3 percent in June.

“Spending more when you’re taking home less and cutting into savings — That’s not the best recipe for stronger spending in the near term," Jonathan Basile, an economist for Credit Suisse, wrote in a note to clients.

The stock market doesn’t seem too concerned. The S&P 500 index , whose member companies have about $1 trillion on their balance sheets, is headed for one of its best months in history, up more than 10 percent. Better than expected earnings, as well as a resolution on the table to the European debt crisis, are behind the gains.

“Things have been very tough, but definitely looking up,” said Mike Murphy of Rosecliff Capital. “Recession is off the table. Consumer balance sheets are improving and housing is bottoming.”

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