The U.S. economy added 200,000 jobs in January, according to the latest jobs report from the Bureau of Labor Statistics. The report exceeded expectations, as experts anticipated the economy would add 180,000 jobs.
The unemployment rate came in at 4.1 percent, unchanged from the December report.
Year over year, average hourly earnings for all employees on private nonfarm payrolls increased by 2.9 percent.
Mark Hamrick, Bankrate’s senior economic analyst, offers his views on the January jobs report.
January certainly brought no chill in hiring. Perhaps the biggest positive surprise on hiring is the continued surge for the goods-producing sector with manufacturing and construction leading the way. The biggest story is the rise in wages with average hourly earnings up 2.9 percent over the past year, the most we’ve seen in years.
Let’s remember that it takes only about 80,000 or so jobs added per month to keep pace with growth in the population. The trend in place for many years now has been well above that level, eliminating slack in the job market.
Tax cut, retail and savings
Consumers have yet to see the benefits of the federal income tax cut reflected in their paychecks. That’s coming beginning this month, which should help boost consumer spending as well as savings. While retailers and others would love to see consumers spend all of the money, our Bankrate surveys have consistently shown that most Americans don’t have enough savings to pay for an emergency expense. So, here’s hoping a good part of the coming tax savings and any increases in wages are saved by Americans. The ongoing shift in spending from brick-and-mortar to online purchases is the larger threat for retailers anyway.
Spike the football; we’re seeing a solid increase in wages. We’ll have to see this sustained as we remember that this has been a long time in coming. Could we see wage growth break through the 3 percent barrier? That’s a key question for the coming months. If that happens, then the markets will have to consider whether the economy is overheating – something we haven’t had to think about since the financial crisis and recession. We’re not there yet after this single monthly report.
The Federal Reserve
The Federal Reserve punted on a rate increase at its just-completed January meeting, leaving open the likely option of a March rate hike. The solid January jobs report only solidifies this expectation, particularly with the increase in wages.
There’s still the February employment report due next month for the Federal Open Market Committee to digest to seal the deal on the first rate hike of the year. The bigger question is how many rate increases are looming in 2018, with the widely held expectation focusing on a total of three. A lot can change, however, between now and the end of the year.
As long as the unemployment rate remains stable, or heads lower as is expected, Americans should gain a further sense of job security, which informs their sense of job satisfaction. Our survey of workers recently found that the average American worker rates his or her job satisfaction at a solid 7 out of 10. If we could get a further pickup in wages, that should add to worker sentiment.