January's Wage Growth Was Fastest in almost a Decade

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In December, the USA economy added 148,000 jobs - fewer than what was expected.

The Labor Department said the unemployment rate came in at 4.1% in January, unchanged from the three previous months and in line with economist estimates.

The gains were broad-based, with the all-important private-sector wages and salaries component rising 2.8 percent y/y, its fastest pace since 2008!

When examining the causes for the flattening of the Phillips curve, we find that wage inflation is being held back by several key factors, notably, low productivity growth and low inflation. "And it is likewise true that the improving labor market is increasingly reaching groups, including African-Americans, that are often at a disadvantage". "Not only did employers report adding 200,000 jobs in January, we also saw wage growth", said Tony Bedikian, head of global markets at Citizens Bank.

Wage growth was much stronger than forecast. "2017 in particular was actually a pretty weak year for real wage growth". And experts say wages had to rise at some point as the country kept adding jobs and unemployment stayed low. As a result, there is more competition for fewer available workers so wages should be going up.

Worker pay jumped in January, with average hourly wages up 2.9 percent from a year ago.

Employers' words may finally be translating into action. This year, the unemployment rate is likely to reach its lowest rate since the 1960s.

However, Chris Low of FTN Financial cautioned against jumping to conclusions on the wage data. Regardless, America has almost 6 million job openings, near a record high. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Construction companies hired 36,000 workers. The industry has added 255,000 jobs over the past 12 months, the biggest rise by sector. Restaurants, hotels, bars and entertainment gained 35,000.

USA financial markets have priced in a rate hike in March.

■ Revisions in the November and December figures produced a net loss of 24,000 jobs.

Nationally there were 6.7 million officially unemployed Americans, a figure that does not reflect the number of workers who have dropped out of the labor force. The average workweek fell to 34.3 hours, the shortest in four months, from 34.5 hours in December.

The solid jobs report was a to be a measure of relief for an embattled White House, as President Donald Trump has taken credit for the extended run of good economic news amid political turmoil. "A 4.1 percent unemployment rate will do that", said Edward Batchelor, managing partner at Hardman Batchelor International. Consumer confidence remains just below its highest point in 18 years. USA financial markets are expecting a rate hike in March.

The U.S. economy entered 2018 with healthy momentum after posting its best year of growth since 2014. But if wages continue to pick up, that could boost inflation. The major averages have all moved to the downside, extending the pullback seen earlier in the week.

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