America gets a raise: Wage growth fastest since 2009
America finally got a raise.
The U.S. economy added 200,000 jobs in January, and wages grew at the fastest pace in eight years.
The unemployment rate stayed at 4.1%, the lowest since 2000, the Labor Department said Friday.
Wages were up 2.9% compared with a year earlier, the best pace since June 2009. Wage growth has been the last major measure to make meaningful progress since the end of the Great Recession.
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.
Economists say it’s time to take note of how strong, or “tight,” the U.S. job market is.
Friday’s numbers show 2018 “will be a year of rising wages and the tightest labor market in over a generation,” said Joseph Brusuelas, chief U.S. economist at RSM, an accounting and consulting firm.
Some economists anticipate that the Republican tax law will continue to boost wages, because some large corporations are giving their workers raises. One-time bonuses, which many other companies have given out, are not counted in the wage growth calculation.
Several states also raised their minimum wage at the start of the year, which helped overall wages grow. And experts say wages had to rise at some point as the country kept adding jobs and unemployment stayed low.
In a tight job market, there are more jobs available than there are workers to fill them. That forces employers to offer higher pay to attract and keep workers.
“It’s too early to call this a trend but the breakout [in wage growth] is very welcome news,” says Robert Frick, chief economist at Navy Federal “It’s a very big deal, let’s hope it continues.”
Employers’ words may finally be translating into action. For years, employers have increasingly said they can’t find skilled workers — or any workers — to apply for job openings. Some economists say there’s a wide gap between the skills employers are demanding and the ones workers have.
But other experts contest that if employers were really desperate for workers, they would raise their wages to recruit or retain new employees. Regardless, America has nearly 6 million job openings, near a record high.
“There is no question that employers are now having to be more aggressive to compete for workers,” says Peter Harrison, CEO of Snagajob, a jobs platform focused on hourly work.
Job gains in January came across the board. Construction companies hired 36,000 workers. Health care businesses added 21,000 new hires. Restaurants and bars gained 31,000 more bartenders, waiters and cooks. Manufacturing gained 15,000 jobs.
“We are really firing on all cylinders,” says Josh Wright, chief economist at iCIMS, a software firm focused on human resources. “It just shows how broad the growth and the positive feelings are across the economy.”
Still, it wasn’t all good news. Job gains in December and November were revised down by a cumulative 24,000 jobs than previously reported. The number of Americans working part-time jobs but seeking full-time work rose a notch to about 5 million workers. And Americans clocked in for fewer hours: The average work week declined a bit to about 34 hours a week.
But overall, economists note the gains in January illustrate a job market that’s come a long way from the Great Recession, which ended in 2009. The economy has added jobs for 88 consecutive months, the longest streak on record. Unemployment has gone from 10% in 2009 to 4.1% today. Jobless claims are at their lowest point in decades. Consumer confidence remains just below its highest point in 18 years.
The move could also force the Federal Reserve to raise its key interest rate faster. Fed officials in December forecast raising rates three times in 2018. But if wages continue to pick up, that could boost inflation. Faster inflation would force the Fed to raise rates faster or more frequently.
American investors certainly see more rate increases on the horizon. The yield on the 10-year U.S. bond shot up to 2.84% after the jobs report, reflecting higher expectations of more rate hikes.