Wage Growth Best in 8 Years
The US economy added 200,000 jobs last month and wage growth was the best we’ve seen since 2009, reports the Labor Department.
Wages are up 2.9% compared to last year, and unemployment is just above 4% (a 17-year-low). Average hourly earnings rose 0.4% in December and 0.3% in January, reaching $26.74.
These numbers show the labor market is tightening, meaning people will have more options on where to work. A tightening labor market is also good news for workers with a criminal record or with little work experience.
“People who are marginally employable suddenly become highly employable in a period like this,” says RSM economist Joseph Brusuelas.
Figures for January are particularly important to President Trump because they mark the first full year of employment data for his Administration. The wage growth and additional jobs are direct results of Trump’s tax overhaul, which fueled growth even before it was passed.
“With 3.5 million Americans receiving bonuses or other benefits from their employers as a result of TAX CUTS, 2018 is off to a great start!” tweeted Trump on Friday.
Jobs gains in January affected a variety of industries:
• Restaurants and bars hired 31,000
• Construction companies hired 36,000
• Health care businesses hired 21,000
• Manufacturing hired 15,000
• Federal government hired 4,000
“The Federal Reserve would like wages to grow even faster – 3% or more – but Friday’s report was a welcome sign for workers after years of stagnant pay,” reports CNN Money.
Economists predict the GOP tax plan will continue to boost wages as more corporations decide to increase employees’ wages. Unemployment is expected to reach 3.5% by the end of 2018.
Wage growth in January was also boosted by increases in the minimum wage, which went into effect in 18 states at the beginning of the year.
“It’s too early to call this a trend, but the breakout [in wage growth] is very welcome news,” says Navy Federal economist Robert Frick. “It’s a very big deal, let’s hope it continues.”
Despite last month’s job gains, there are still an estimated 6 million job openings in America – nearly a record high. January’s job gains were somewhat offset by stats from November and December, during which time job gains were revised down by 24,000. The number of part-time employees seeking full-time work increased to 5 million and the average workweek dropped to 34.3 hours per week.
Even so, January’s gains show just how far we’ve come since the recession that ended in 2009.
The recession was followed by 88 consecutive months of added jobs (the longest streak on record) and unemployment dropped from 10% (in 2009) down to just 4.1%.
As predicted in December, the growing economy could lead to inflation and multiple interest rate hikes in 2018.
“This report supports the Fed’s contention that the jobs market is nearing full capacity and wage and inflation pressure has begun to make its way into the data,” says BNY Mellon strategist Marvin Loh. “With almost full odds priced in for a March rate hike, investors have moved towards the second, third, or even possible fourth rate hike this year.”
Editor’s note: Wages do not go up just because you raise the minimum wage. This only serves to reduce employees. Wages rise when the demand for workers is high and workers have a choice of jobs.