WASHINGTON • US job growth surged in January and wages increased further, recording their largest annual gain in more than 81/2 years, bolstering expectations that inflation will push higher this year as the labour market hits full employment.
Non-farm payrolls jumped by 200,000 jobs last month after rising 160,000 in December, the Labour Department said yesterday.
The jobless rate was unchanged at a 17-year low of 4.1 per cent. Average hourly earnings rose nine cents, or 0.3 per cent, in January to US$26.74 (S$35.20), building on December's solid 0.4 per cent gain.
That boosted the year-on-year increase in average hourly earnings to 2.9 per cent, the largest rise since June 2009, from 2.7 per cent in December. Workers, however, put in fewer hours last month. The average workweek fell to 34.3 hours, the shortest in four months, from 34.5 hours in December.
The robust employment report underscored the strong momentum in the economy at the start of the year. Economists say job gains are being driven by buoyant domestic and global demand.
Given that the labour market is almost at full employment, economists saw little boost to job growth from the Trump administration's US$1.5 billion tax cut package passed by the Republican-controlled Congress in December, in the biggest overhaul of the tax code in 30 years.
President Donald Trump and his fellow Republicans have cast the fiscal stimulus, which includes a reduction in the corporate income tax rate to 21 per cent from 35 per cent, as creating jobs and boosting economic growth.
According to outplacement consultancy firm Challenger, Gray & Christmas, only seven companies, including Apple, had announced plans to add roughly a combined 37,000 new jobs in response to the tax cuts as of the end of January.
Economists polled by Reuters had forecast non-farm payrolls rising by 180,000 jobs last month and the jobless rate remaining at 4.1 per cent. January's expected job gains were above the monthly average of 192,000 for the past three months.
The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.
Job growth is expected to slow this year as the labour market hits full employment. Companies are increasingly reporting difficulties finding qualified workers, which economists say will force some to significantly raise wages as they compete for scarce labour.
Wage growth last month was likely supported by increases in the minimum wage in 18 states. They probably also got a lift from the tax cut. Firms like Starbucks and FedEx have said they will use some of the savings from lower taxes to boost wages for workers.
Further gains are expected this month when Walmart raises entry-level wages for hourly employees at its US stores. Annual wage growth is now close to the 3 per cent that economists say is needed to push inflation towards the Federal Reserve's 2 per cent target.
Fed officials on Wednesday expressed optimism that inflation will rise towards its target this year. Policymakers, who voted to keep interest rates unchanged, described the labour market as having "continued to strengthen", and economic activity as "rising at a solid rate". US financial markets are expecting a rate hike in March.
REUTERS
