US Private Payrolls Post Another Solid Gain For January

The US labor market added 267,000 jobs in the private sector last month, the government reports–quite a bit more than the consensus forecast was looking for. The Labor Department also revised the data for recent history and today’s release shows that growth has been stronger than previously estimated. In addition, the latest figures show that wage growth picked up. Bottom line: the news is quite bullish, building on recent strength and, in the process, boosting the odds that the Federal Reserve will start raising interest rates in the near term, perhaps as early as June, according to some forecasts.

As for the data du jour, the key message is that the acceleration in the economy’s ability to mint new jobs is very much alive. This evidence is especially striking when we look at the year-over-year trend. Indeed, private payrolls increased by 2.70% in the year through last month—the strongest annual pace since the late-1990s (black line in chart below).


As an added bonus, today’s numbers show that the growth remains broad based, including the cyclically sensitive goods-producing sector. In addition, wage growth is showing a bit more strength in the latest report, with average hourly earnings rising 0.5% in January, the best gain in more than six years. On a year-over-year basis, average hourly earnings climbed 2.2%, the most since last August.

The improvement in wage growth is arguably the key data point in today’s update because it helps the Fed rationalize a rate hike down the road at a time when inflation is still soft and running well below the central bank’s target.

As usual, it’s best not to read too much into any one report, especially one that has a history of fairly dramatic revisions. But the bullish evidence is starting to pile up, particularly in the rising annual pace. As the year-over-year growth rate creeps higher, month after month, it’s pretty clear that the improvement is the genuine article.

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