US economy delivers jobs and pay rise

America created over one million jobs in three months – the first time this has occurred since the late 1990s boom.

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.

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.

Recommended

Joe Biden’s spending spree will lift American spirits and markets – but it comes with a sting in the tail
US stockmarkets

Joe Biden’s spending spree will lift American spirits and markets – but it comes with a sting in the tail

New US president Joe Biden is planning to throw trillions of dollars in stimulus at his country’s economy. Markets will love that. But it comes with a…
25 Jan 2021
Beware: inflation is starting to stir in the US
Inflation

Beware: inflation is starting to stir in the US

With US consumer prices up by 1.4% in the last year, concern about inflation is now everywhere.
22 Jan 2021
Inflation looks likely to take off this year – but there’s one key risk
Inflation

Inflation looks likely to take off this year – but there’s one key risk

With the world’s governments spending money hand over fist, inflation looks certain to take off at some point. But China could change all that. John S…
19 Jan 2021
Forget austerity – governments and central banks have no intention of cutting back
Global Economy

Forget austerity – governments and central banks have no intention of cutting back

Once the pandemic is over will we return to an era of austerity to pay for all the stimulus? Not likely, says John Stepek. The money will continue to …
15 Jan 2021

Most Popular

Bitcoin does consume a lot of energy – but here’s why it’s worth it
Bitcoin

Bitcoin does consume a lot of energy – but here’s why it’s worth it

Some people question bitcoin’s legitimacy because it uses huge amounts of electricity to maintain its network. But that’s not a failing, says Dominic …
27 Jan 2021
Joe Biden’s spending spree will lift American spirits and markets – but it comes with a sting in the tail
US stockmarkets

Joe Biden’s spending spree will lift American spirits and markets – but it comes with a sting in the tail

New US president Joe Biden is planning to throw trillions of dollars in stimulus at his country’s economy. Markets will love that. But it comes with a…
25 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021