The U.S job market is climbing steeply as the employers have added around 200,000 jobs and the wages are growing at a faster rate. The predictions are that the hiring could remain strong this year despite of the low unemployment rate, which is resulting in worker shortage. These are indications that the employers are competing for the limited pool of workers. The raise in wages is fueled by Republican tax cuts and minimum wage increase in 18 states.
According to a separate survey done, the unemployment rate is steady 4.1% as expected. The jobless rate is all time low since December 2000.
The hourly earnings also rose from 2.5% in December to 2.9% in January. This is more than what economists’ projected, 2.6%. This is nearly 3% jump in pay and it marks the fastest pace since the middle of 2009, just as the economy was emerging from the Great Recession. According to Nationwide’s chief economist David Berson, “The faster pace of wage gains indicates that the labor market is tightening, with employers having to pay higher wages to get the workers they want.”
The month of December and January have seen a growth of 11 cents and 9 cents respectively in the average hourly earnings for all employee on private non-farm jobs. There by making the average hourly earnings $26.74.
The number of jobs in December also went up by 12,000 thereby making 160,000 jobs.
The hiring rate had reduced in the last few months of the last year possibly due to unavailability of the workers. Economists are expecting the job growth to moderate further to about 160,000 in 2018 from 170,000 last year due to shortage of worker pool.
The strong hiring at the beginning of the year is in favor for U.S. workers, but it may result in pressurizing the Federal Reserves to raise interest rates more quickly than expected to avoid inflation spiking up and economy overheating. According to Luke Bartholomew, an investment strategist at Aberdeen Standard Investments, “This is a much stronger outcome than most expected. The headline unemployment number is good but the wage growth is really positive. It definitely makes it a bit more likely that the Fed will have to do more than the three hikes that they’re currently planning for this year.”
According to economists, the strong employment can support the Fed to raise rates by March.
The majority gains seen in January jobs are in construction, food service and drinking places, health care, durable goods industries and manufacturing. Here is a quick look on the amount of jobs added by each of these fields:
- Construction – 36,000 (5,000 in residential building construction)
- Food Service and Drinking Places – 31,000
- Health Care – 21,000 (13,000 in hospitals)
- Durable Goods Industries – 18,000
- Manufacturing – 15,000
Reaction in the U.S. government bond market showed that investors think the Fed could move more aggressively. The yield on the 10-year Treasury note, which moves in the opposite direction of its price, jumped above 2.8% for the first time since April 2014, leaving yields at their highest level in nearly
The other economic data is also encouraging. According to a survey of purchase managers, factories are expanding rapidly in January. This may have been caused by a weaker US dollar and increased growth oversees that as boosted US exports.
At the same time, Americans are appearing confident in purchasing homes. The sales of existing houses have reached at higher level in last 11 years. At the same time, shortage of properties is posing as a hindrance for would-be buyers. The demand for houses has boosted the home construction in 2017 and its fastest pace in the decade. The Construction companies have added 210,000 jobs last year, the most in two years.