Nonfarm payrolls grew by 200,000 in January, exceeding economists’ predictions by 11%. As jobs increased, the unemployment rate continued to hold steady at a 17-year low of 4.1%. But despite these positive economic indicators, another monetary signal made a notable change: wage growth.
Wages reportedly grew the fastest since the recession in 2008 with average hourly earnings up .3% for the month, reflecting an annualized gain of 2.9%. Fantastic news – another big win for the economy, right? Well, perhaps not…
“The faster pace of wage gains indicates that the labor market is tightening, with employers having to pay higher wages to get the workers they want,” said David Berson, Nationwide’s chief economist.
While average hourly earnings increased in January, average workweeks fell to 34.3 hours from 34.5, the biggest decline since April 2013. Employees may be earning higher wages per hour, but they’re receiving less hours to work each week. So when payday arrives, Americans may be taking home less money.
Shorter workweeks could be fueled in part by minimum wage increases in 18 states. The federal minimum wage remains at $7.25 an hour and hasn’t increased over the past nine years, but new state wage laws will boost 4.5 million workers’ wages. When Seattle increased its minimum wage last year, low-wage workers clocked an average of 9% fewer hours and earned $125 less each month.
Speaking of low-wage workers, the manufacturing and construction sectors created more than 25% of the 200,000 new jobs. “Perhaps the biggest positive surprise on hiring is the continued surge for the goods-producing sector with manufacturing and construction leading the way,” said Mark Hamrick, Bankrate’s senior economic analyst.
With average hourly earnings growth, shorter average workweeks, and minimum wage increases, it’s hasty to jump to any concrete conclusions. Although the US economy has created 200,000 jobs, long-term averages provide a more accurate gauge of the country’s economic health. Coming months will tell whether these new jobs and pay gains represent sustained improvement.