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Job and Wage Gains Deliver a Promising Start for the Year Job and Wage Gains Deliver a Promising Start for the Year
(about 2 hours later)
The Labor Department released its official hiring and unemployment figures for January on Friday morning, providing the latest snapshot of the American economy. As the unemployment rate has fallen in recent months and the economy has roared, one central question has bedeviled the American job market: Where is the wage growth?
■ 200,000 jobs were added last month. Wall Street economists had expected an increase of about 180,000, according to Bloomberg. New data on Friday suggested an answer: It is here, and it is now.
■ The unemployment rate was at 4.1 percent, the same as in December and the lowest since 2000. Average hourly earnings jumped 2.9 percent in January from a year earlier, the Labor Department said Friday, the latest sign that the long, slow economic recovery is at last reaching Americans’ pocketbooks. Separate data released earlier this week showed that private-sector wages and salaries rose 2.8 percent in the final three months of 2017 compared with a year earlier, the fastest growth since the recession.
■ Average earnings rose by 9 cents an hour and are up 2.9 percent over the past year. “People have been wondering when the wages are going to start to rise,” said Catherine Barrera, chief economist of the online job marketplace ZipRecruiter. “I think that over the first six months of this year, we’re really going to start to see the wages rise.”
■ Revisions in the November and December figures produced a net loss of 24,000 jobs. If such predictions are borne out, there could be political ramifications. President Trump hailed his economic record in his State of the Union address on Tuesday, and Republicans are counting on the strong economy to help them in the midterm elections in November. Most economists contend that Mr. Trump deserves relatively little credit for the strong economy, which predates his election and is partly a result of a global rebound outside his control. But voters may not focus on such nuances.
Strong job growth continued in January. Better yet, that strength may at last be translating into faster pay increases for workers. Economists cautioned against reading too much into a single month of data, which is preliminary and will be revised at least twice. Several times in recent years, wage growth has appeared to pick up, only to fall back to earth in subsequent months. And other measures of wage growth haven’t yet shown the same acceleration.
Employers added 200,000 jobs in January, a modest uptick from December and the 88th straight month of job growth, the longest such streak on record. The pace has slowed somewhat over the last two years but remains solid. But there is reason to think that pay gains will prove more durable this time around. Job growth has been steady — employers added 200,000 jobs in January, modestly more than in December — and the unemployment rate has fallen to 4.1 percent, a 17-year low. That is forcing companies to compete harder for workers, a recipe for pay increases.
“We’re feeling pretty good about the start of the year,” said Becky Frankiewicz, president of ManpowerGroup, a staffing firm. “We’re seeing growth across industries.” “It’s as tough as it’s ever been,” Michael Mabry, president and chief operating officer of Mooyah Burgers, Fries and Shakes, a 100-restaurant chain based in Texas, said of the current hiring environment.
The question — the “bazillion-dollar question,” Ms. Frankiewicz said — has long been when strong hiring would translate into strong wage gains for workers. Friday’s report may have begun to provide the answer. Average hourly earnings rose 2.9 percent in January from a year earlier, the fastest growth of the recovery so far. Mr. Mabry said that in some parts of the country, workers would walk off the job knowing that they could find another restaurant hiring down the street. Still, he said, Mooyah can’t just raise pay across the board — the burger industry is “a pennies business,” Mr. Mabry said, and wage increases quickly eat into profits.
Lagging pay has been a persistent economic mystery. But many economists expect wage growth to accelerate in 2018, especially if the unemployment rate continues to fall, forcing companies to compete to attract scarce workers. Instead, Mr. Mabry said, he is looking for ways to make restaurants more efficient by reducing turnover, improving morale and cross-training workers for various jobs. The goal, he said, is to be able to pay higher wages to fewer workers.
Economists warned about reading too much into January’s strong wage numbers — several times during the recovery, wage growth has appeared to accelerate, only to fall back to earth. But they said there was little doubt that the latest numbers were an encouraging sign. Mooyah is also trying to recruit untapped sources of talent. The company recently started a program to help franchisees expand their marketing efforts by hiring at-home parents and others who had not been in the labor force. The jobs are meant to appeal to people who might not be looking for traditional work: They do not require being at an office every day or having a traditional schedule. Mr. Mabry said that kind of flexibility made sense when filling full-time slots with experienced workers was harder than ever.
“People have been wondering when the wages are going to start to rise in response to this tightness,” said Catherine Barrera, chief economist of the online job site ZipRecruiter. “I think that over the first six months of this year, we’re really going to start to see the wages rise.”
There are also other signs that employers may be loosening their purse strings. A separate report from the Bureau of Labor Statistics this week found that private-sector wages and salaries rose 2.8 percent in the last three months of 2017, compared with a year earlier, the fastest growth since the recession. But other measures have found that pay growth is slowing.
“The tightening labor market suggests wages should be accelerating, and now we have two different reports showing that wages are accelerating,” said Jed Kolko, chief economist of the job site Indeed.
With unemployment low, employers are working harder to find employees. They are becoming more willing to consider candidates with criminal records, for example, or to waive educational requirements. The car retailer AutoNation said this week that it was no longer refusing to hire workers who test positive for marijuana use — a sign of changing legal and societal norms, but also an indication that companies are rethinking hiring practices in a tight labor market.
“People who are marginally employable suddenly become highly employable in a period like this,” said Joseph Brusuelas, chief economist of RSM, a financial consulting firm.
The strong labor market is pulling workers off the economy’s sidelines. The labor-force participation rate — the share of adults either working or actively looking for work — has edged up recently, although it was flat in January. Diane Swonk, chief economist for the investment firm Grant Thornton, said she expected to see companies start trying to draw people into the labor force by letting them work from home or offering flexible schedules.
Mooyah Burgers, Fries and Shakes, a 100-restaurant chain based in Texas, recently started a program to help franchisees expand their marketing efforts by hiring at-home parents and others who had not been in the labor force. The jobs are meant to appeal to people who might not be looking for traditional work: They do not require being at an office every day or having a traditional schedule.
Michael Mabry, Mooyah’s president and chief operating officer, said that kind of flexibility made sense when filling full-time slots with experienced workers was harder than ever.
“Why do I have to be pigeonholed into a particular résumé or a particular experience?” Mr. Mabry said of his recruitment approach. “I’m sure there is someone out there who can bring something different to the team. It’s just having an open mind.”“Why do I have to be pigeonholed into a particular résumé or a particular experience?” Mr. Mabry said of his recruitment approach. “I’m sure there is someone out there who can bring something different to the team. It’s just having an open mind.”
Recent job growth has been concentrated in blue-collar industries such as construction, manufacturing and energy. Different forces have been driving those trends — manufacturing, for example, has been driven by the strong global economy, while energy has been boosted by rising oil and gas prices. But the effect is the same: improving job opportunities for blue-collar workers. More companies are likely to adopt that kind of flexible approach as the labor market tightens. And there are other signs that companies are rethinking their approach to hiring. They are becoming more willing to consider candidates with criminal records, for example, or to waive educational requirements. The car retailer AutoNation said this week that it was no longer refusing to hire workers who tested positive for marijuana use — a sign of changing legal and societal norms, but also an indication that companies are rethinking hiring practices in a tight labor market.
That trend continued in January. Construction companies added 36,000 jobs, and manufacturers tacked on another 15,000. “People who are marginally employable suddenly become highly employable in a period like this,” said Joseph Brusuelas, chief economist of RSM, a financial consulting firm.
January’s gains were broad-based, however. The leisure and hospitality sector added 35,000 jobs, the fourth straight month of significant growth, and the health care industry — a consistent source of job growth in both the recession and the recovery — remained strong. Even retailers, who have been cutting jobs in the face of competition from online competitors, added more than 15,000 jobs. There were some notes of caution in Friday’s report. The total number of hours worked — a measure that combines the number of jobs and the average hours worked on those jobs — fell slightly, a sign that demand for labor might not be as strong as the headline job-growth figures suggest. And the unemployment rate for African-Americans, a figure highlighted by Mr. Trump after it fell to its lowest recorded level in December, jumped nearly a full percentage point, to 7.7 percent. The unemployment rate for white Americans fell to 3.5 percent.
In his State of the Union address Tuesday night, President Trump boasted of the strength of the American economy, citing a rebound in the manufacturing sector and a decline in the unemployment rate for African-Americans, which recently hit its lowest level on record. Job growth in manufacturing continued in January. But the black unemployment rate jumped nearly a full point, to 7.7 percent, its highest level since April. But despite such month-to-month fluctuations, economists say the tightening labor market is paying dividends to groups that were left behind by earlier stages of the recovery. Wages have risen most quickly in lower-paying industries in recent months, and employment gains have gone disproportionately to less-educated workers.
Unemployment rates for specific demographic groups are volatile, and economists caution against making too much of short-term fluctuations. Over the longer run, there is little doubt that the black unemployment rate has fallen significantly as the job market has improved, but also that it remains well above the rate for whites, which fell to 3.5 percent in January. Companies including Walmart, Starbucks and Lowe’s have also announced new benefits for hourly workers, such as paid time off to care for sick relatives and paid parental leave. And the number of Americans working part time because they can’t find full-time work has fallen 15 percent in the past year.
More generally, most economists contend that Mr. Trump deserves relatively little credit for the strong economy, which predates his election and is partly a result of a global rebound outside his control. But they say a tightening labor market will tend to benefit groups left behind by earlier stages of the recovery, including racial and ethnic minorities and less-educated workers. Taken together, the data paint a picture of an economy that is not just creating jobs but that is increasingly creating good ones.
Mr. Trump and other Republicans argue that the economy will also benefit from the recently passed tax law. They point to recent announcements from Walmart and other companies, which have cited tax savings in their decisions to raise wages and pay out bonuses to workers. (One-time bonuses aren’t included in the hourly wage data released Friday, but will show up in broader measures of income.) “Employers don’t simply raise wages when the labor market gets tighter; they may also raise the quality of the job to get people to come on board,” Ms. Barrera said.
Many economists are skeptical of such claims, regarding them as timely public relations moves. But they say the tax cuts should provide at least a modest addition to economic growth in coming years — although probably not enough to let the law pay for itself, as its backers have promised. Mr. Trump and other Republicans argue that the economy will also benefit in coming months from the new tax law. They point to recent announcements from Walmart and other companies, which have cited tax savings in their decisions to raise wages and pay bonuses. (One-time bonuses aren’t included in the hourly wage data released Friday, but will show up in broader measures of income.)
Many economists are skeptical of such claims, regarding them as timely public relations moves. And they question the wisdom of providing fiscal stimulus when unemployment is low and the Federal Reserve is raising interest rates to curb inflation. But they said there were signs that corporate executives had become more confident in the economy since Mr. Trump took office, which could make them more willing to hire workers and raise pay.
“I hear my clients saying the tax bill gave them more confidence in the pro-business economy,” said Tom Gimbel, chief executive of LaSalle Network, a staffing firm. “There’s confidence coming from D.C. that they’re not going to get in the way.”“I hear my clients saying the tax bill gave them more confidence in the pro-business economy,” said Tom Gimbel, chief executive of LaSalle Network, a staffing firm. “There’s confidence coming from D.C. that they’re not going to get in the way.”