The latest US labour market data fuelled optimism over growth. Last month non-farm payrolls grew by 257,000, while gains in the previous two months were revised up by a cumulative 147,000. That means over one million jobs were created in three months, the first time this has occurred since the late 1990s boom. Average hourly earnings expanded by 0.5% in January, the biggest monthly increase since late 2008. On an annual basis, earnings are climbing by 2.2%.
What the commentators said
The latest figures "aren't earth-shattering", but they suggest that "wage growth is finally turning around" as the labour market keeps tightening. Employees are "gaining more leverage in the labour market to demand higher wages" and employers are acceding to their requests.
Low productivity has kept a lid on wage growth in recent years, said the Free Exchange blog on economist.com. That problem endures, but a more cyclical one may be dissipating. In December 2013, long-term benefits for the unemployed were cut radically. As people lost benefits, they were willing to accept lower wages. That effect may be wearing off now that those who shifted into low-wage jobs have gained some experience and become bolder about demanding better pay.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Employment growth "is clearly on fire", said Capital Economics, and the overall outlook is also encouraging. The fall in the oil price acts as a tax cut for consumers and the resultant boost to household spending will more than offset cutbacks in the oil sector and the impact on exports from the stronger dollar. Expect the US Federal Reserve to start raising interest rates in June to ensure inflation doesn't take off.
-
How retirement pots risk running out 11 years early if inflation remains highPension savers could find their retirement income may not last as long as they anticipated over fears that inflation may not slow down
-
How extending stealth tax freeze would cancel out pensioners’ Winter Fuel Payment by 2030Pensioners relying on just the full new state pension face paying tax on their income within a few years, as the payment rises but thresholds remain frozen
