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.
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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.
Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.
After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.
His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.
Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.
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