United States: Payrolls up in January; wage growth highest since recession
February 2, 2018
Results from the January jobs report indicate that hiring dynamics picked up in the month, with employment gains exceeding market expectations. Non-farm payrolls rose 200,000 in January, well above the 176,000 expected by analysts and above December’s print of 160,000 new jobs, a figure that was revised up 12,000 from last month’s report.
Looking at sectoral data, January’s print was largely driven by an acceleration in hiring growth among service industries, with gains of 139,000 jobs following the 111,000 new jobs created in December. The retail sector rebounded in January, adding 15,400 employees after cutting 25,600 jobs in December. Meanwhile, goods-producing industries kept up the strong pace from the previous month, with construction payrolls up 36,000 and the manufacturing sector adding 15,000 jobs in January.
The unemployment rate held steady at a 17-year low of 4.1% for the fourth consecutive month in January, in line with market expectations. The labor force participation rate was also unchanged from the previous month at 62.7%, while the duration of the average workweek unexpectedly decreased to 34.3 hours in January from 34.5 hours in December. The decline in the number of hours worked partially reflected weather-related disruptions stemming from a cold snap in the eastern part of the United States.
Average hourly earnings edged up 0.3% from the previous month, down from the upwardly revised 0.4% gain recorded in December (previously reported: +0.3% month-on-month). On an annual basis, wage growth came in at 2.9%, up from December’s 2.5% increase. The figure, among the most scrutinized in the report, was the highest since the recession ended in June 2009.
January’s preliminary data suggests that wages may finally be picking up, after struggling to gain traction in recent quarters despite an exceedingly tight labor market. It is likely that minimum wage increases across 18 states and numerous cities—which kicked in on 1 January—may have played a role in driving these wage developments. Moreover, the released data reinforces expectations of a rate hike in March amid the possibility that inflationary pressures are taking hold. If wage gains are sustained, they will also test the Fed’s commitment to follow through on its plan to further tighten policy in the rest of the year.
Author: Javier Colato, Economist