Best wage growth in six years boosts another strong jobs report

Tyler Kelly, 19, left, fills out applications for parking enforcement and environmental compliance jobs during a public safety job fair at City Hall in Saginaw, Mich., on Jan. 29.
(David C Bristow / Associated Press)

The economy had another robust month of job growth in January, adding 257,000 net new positions and producing the best wage gains in more than six years, the Labor Department reported Friday.

The unemployment rate ticked up to 5.7%, but that was because 703,000 more people entered the labor force, a positive sign for the jobs market, the report said.

In addition to January’s job growth, the Labor Department said the economy added an additional 147,000 net new jobs combined in November and December.


The upward revisions mean the U.S. economy added just over 1 million net new jobs in the three months ending Jan. 30, the first time that’s happened since 1997.

“The labor market is gaining momentum,” said Sophia Koropeckyj, senior economist at Moody’s Analytics. “Employers have strong enough demand for their products and services that they really have to start ramping up their hiring.”

Economists had forecast the January employment report would show a gain of 230,000 jobs and the unemployment rate would hold steady at 5.6%, the lowest since June 2008.

Wage gains were surprisingly strong in January, rebounding from a disappointing December.

Average hourly earnings rose by 12 cents last month to $24.75 after a disappointing drop of 5 cents the previous month. The 0.5% gain in January was the best since late 2008.

“We have been expecting both stronger wage growth and stronger labor force growth. Certainly this is a good start, but let’s see if it continues,” said Gus Faucher, senior economist at PNC Financial Services Group.


Wage growth has been slow to recover from the Great Recession.

But average hourly earnings were up 2.2% for the 12 months ended Jan. 31. The consumer price index rose 0.7% in 2014, largely because of falling oil prices, meaning wage growth easily outpaced inflation.

Still, overall wage growth has been around 2% since the recession ended in 2009, said Doug Handler, chief U.S. economist at IHS Global Insight.

Average hourly earnings got a bump last month because the minimum wage rose in about 20 states, although many of those increases were relatively small, cost-of-living adjustments.

An increase in the federal minimum wage, which hasn’t risen since 2009 and has not kept up with inflation for decades, would help boost earnings for average workers, said Damon Silvers, policy director of the AFL-CIO.

“It’s good to see a little bit of wage growth in the economy,” he said of Friday’s report. “Unfortunately, in this recovery, even as job growth has accelerated, wage growth has been the exception rather than the rule.”

The jobs report came amid signs that economic growth slowed in the fourth quarter after a blistering six-month stretch.

The Commerce Department said last week that the economy expanded at a 2.6% annual rate in the fourth quarter, below forecasts and down significantly from 5% in the previous quarter.

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