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Fast Comment USHighest wage growth since 2009

  1. Stronger job growth trend
  2. Unemployment unchanged but…
  3. Watch the wage growth
Stronger job growth trend
Today’s January labour market report was stronger than expected. Non-farm payrolls increased by 200,000 more than forecast, up from 160.000 in December. Payroll gains were revised up for the previous three months, significantly improving the picture of the trend (first graph). Hence, employment gains showed little sign of slowing, as some had expected, due to a decreasing pool of (qualified) available job seekers. Perhaps increasing wages (see below) are about to entice more people into joining the labour force. At a sector level, the rebound was especially marked within service jobs, after the temporary holiday-related setback in December, as increases were found within trade, transport and retail.
Unemployment unchanged but…
As expected, the unemployment rate was unchanged at 4.1 percent for a fourth straight month, but the establishment survey was positive in its details, as it was based on a robust increase in the labour force (+518,000 persons), and 409,000 of these went into employment.
Watch the wage growth
Most importantly perhaps, hourly earnings rose more than expected to 2.9 percent y-o-y, the most since 2009. Additionally, December wage growth was revised up to 2.7 percent y-o-y. The January increase was likely helped by increased bonuses and lifted minimum wages in the wake of the tax reform. This definitely strengthens our call for wage growth to lift-off. Hence, wage growth seems to have resumed a more pronounced rising trend, which will probably continue in the coming months. This is supported by wage indicators from businesses (second graph) and households. Bottom line: Wage growth will likely add to increasing inflation this year, which, if anything, could convince the Federal Reserve to hike rates four times this year rather than three, which is presently the median assessment from FOMC members.

Source: Macrobond


Source: Macrobond


Rasmus Gudum-Sessingø

Senior Economist


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