Americans start to see enduring wage gains in tighter job market
AFTER six straight years of annual job gains topping two million, America’s labour market is as tight as ever, and it’s entering the next phase: an enduring pickup in wages.
Average hourly earnings jumped by 2.9 per cent in the 12 months through December, the most since the last recession ended in June 2009, according to the Labour Department’s employment report released on Friday in Washington. Workers in almost every category, from mining and construction to retail and education, saw pay cheques rise from November. The 4.7 per cent jobless rate remains close to a nine-year low, even with a tick up last month.
Job and wage prospects would improve even more following any successful legislation aimed at stirring growth, such as tax cuts and infrastructure investment, as President- elect Donald Trump has promised.
“The trend is clearly moving toward firmer wage growth,” said Michael Feroli, chief US economist at JPMorgan Chase & amp; Co. in New York. “The labour market is tight and getting tighter. I expect to see continued acceleration in wages this year.”
The encouraging news on worker pay underscores the next stage of the labour-market recovery, which was defined by years of wage stagnation amid strong growth in payrolls. Now, the economy is adding jobs at a slower pace and measures of slack are diminishing, meaning labour shortages may become more common. That makes a sustained acceleration in pay cheques critical to boosting household income and supporting spending.
Some cooling in the job market was apparent in the latest report. Payrolls climbed by 156,000 in December after 204,000 in November, and the participation rate increased to 62.7 per cent, which may continue as more people are drawn into the labour force and find work. Other measures of slack improved, including a drop in the number of Americans working part-time who would rather have a full-time position.
The December increase in wages followed a 2.5 per cent advance the prior month. The improvement may have, in part, reflected the unwinding of a calendar quirk that muffled the November tally. Since the 15th of the month fell within the employment survey week, increases in bi-monthly pay are more likely to have been captured.
Even so, year- over-year hourly earnings have accelerated in three of the past four months, and wages were up 0.4 per cent from November, matching the fastest pace since last January.
Among industries that posted the biggest hourly wage gains were mining and logging, rising 0.8 per cent from the previous month, and retail, up 0.6 per cent. Construction workers saw earnings increase 0.4 per cent, as did Americans in leisure and hospitality. Not everyone is getting excited just yet. Barclays Plc economists Rob Martin and Michael Gapen pointed out the more modest 2.5 per cent year- over-year December gain in earnings for production and non- supervisory workers, which exclude managers. — WPBloomberg