US hiring picked up in January, and wages rose at the fastest annual pace since the recession ended, as the economy’s steady move toward full employment extended into 2018.
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Further gains are expected in February when Walmart (NYSE:WMT) raises entry-level wages for hourly employees at its U.S. stores. But many economists expect wage growth to accelerate in 2018, especially if the unemployment rate continues to fall, forcing companies to compete to attract scarce workers.
Further, one of the most under-appreciated facts about the USA labor market stems from the rebound in the labor force participation rate.
Catherine Barrera, chief economist at the job site ZipRecruiter, said employers are starting to adjust wage practices. Wages have been a slight disappointment in recent months as many economists have expected the low level of unemployment to create more wage pressures in the economy. The category of warehousing and storage – partly associated with Internet shopping – added 11,100 jobs, the report showed.
In a tight job market, there are more jobs available than there are workers to fill them.
“The other trend we are seeing in executive search is an increase in confidential searches given the limited labor pool for many specialized roles”, he added. Over the course of the year, wages increased by 2.9%, or 75 cents.
Employers’ words may finally be translating into action. “A classic example in economics is like a coal mining town where workers can not actually go find another employer”. Workers, however, put in fewer hours last month.
January’s job growth was broad. More companies such as Starbucks have announced perks for hourly workers such as paid parental leave.
The healthcare sector may have added 20,600 jobs in the first month of 2018, but that represents a steep 37% drop from the 32,800 jobs gained in the industry in December. Manufacturing has added 186,000 jobs over the past 12 months.
“We’re feeling pretty good about the start of the year”, said Becky Frankiewicz, president of ManpowerGroup, a staffing firm.
BLS revised the job creation numbers over the last two months, the net effect of which was to lower the number by 24,000. The remaining 1.2 million persons marginally attached to the labor force in January had not searched for work for reasons such as school attendance or family responsibilities. The total number of hours worked – a measure that combines the number of jobs and the average hours worked on those jobs – fell slightly, a sign that demand for labor might not be as strong as the headline job-growth figures suggest. The overall January figures mark the 88th straight month of job growth in the United States.
Thirteen months ago, before Donald Trump had taken office, we issued a caveat about headline unemployment: It would be pretty tough for Trump to do better than 4.7% unemployment, which is generally considered to be “full employment”. Today’s job market is more competitive than it was in decades past, and workers with higher educational attainment and more specialized skills are rewarded. Consumer confidence remains just below its highest point in 18 years.
The result beat forecasts, which predicted an increase of 180,000, and helped offset December’s disappointing result.
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Meaning, that even if wage growth is picking up it is canceled out by inflation when it comes to real wages.
