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American workers finally see a real bump in pay

Good news, workers: Your paycheck is getting bigger. In the third quarter, employees' weekly earnings rose 3.3 percent from a year ago, according to new federal labor data -- a hefty jump from 2.6 percent in the same period in 2017. 

Also heartening is that wage growth is outpacing inflation, which rose 2.6 percent between July and October. The main reason wages are climbing is that U.S. unemployment is at its lowest level since 1969. A low jobless rate means a tight labor market is forcing employers to boost pay to attract workers. 

Faster wage growth has been the key missing ingredient during the recovery that followed the housing crash. For years after the Great Recession, economists predicted that earnings were set to pick up. It didn't happen. 

Theories abounded to explain why wages idled and even failed to keep pace with inflation: weakened unions, diminished employee productivity, a growing number of Americans exiting the labor force, automation. 

That debate continues. After all, wages are growing, but they're not exactly going through the roof. Average hourly earnings grew at an annualized rate of 2.8 percent in September, still less than economists would like to see given the lowest jobless rate in decades. 

But pay is moving in the right direction -- and it could get an even bigger lift if the job market continues to sizzle. The Federal Reserve expects unemployment, now at 3.7 percent, to fall to 3.5 percent next near. Looking further out, economists from Goldman Sachs think it could reach 3 percent in early 2020. That would be the lowest jobless rate since shortly after World War II, when the American economy was enjoying heady growth.

Meanwhile, some of America's biggest companies, including Amazon and Walmart, are finally bowing to public pressure to hike their minimum wage. Labor activists hope that will pressure other large employers to follow suit. 

The big question: Will wages continue to swell or, as they have before during the anemic recovery, begin to flat-line? Although the economy is cooking now, Fed policymakers and independent economists forecast a decline in growth beginning in the final quarter of the year and into 2019.

Such a slowdown would likely cast a chill on the late, and long-awaited, thaw in worker pay.

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