US Employment Accelerates
About the author:
- Author name:
- By Michael Knox
- Job title:
- Chief Economist and Director of Strategy
- Date posted:
- 11 February 2015, 4:16 PM
On the face of it, the US payroll employment result for January was good but not
special. Unemployment was unchanged at 5.7%. Total job numbers grew by
257,000.
This was good but we have seen previous months that were better.
What is really special about the January employment number is the growth rate
that employment is now achieving.
In Chart 1 below we see the year on year
rate of growth of payroll employment since the beginning of 2004:
For the year to January, US payroll employment grew by 2.33%. Not only is this
higher than the year to December, this growth rate is the highest since
employment began to move again into positive territory in 2010.
This is the
highest rate of growth of employment this business cycle. The growth rate of
employment for the year to January is also higher than the peak growth rate for
the previous business cycle. This was 2.2% for the year to March 2006.
In addition to this healthy and broad based growth in employment, particularly services employment, we also see the beginning of increases in wages growth.
Over the year to January, average hourly earnings have risen by 2.2%. Because this is slightly higher than inflation, we can see this is the very beginning of increases in real wages growth.
Rate rise
This good employment result, together with the beginning of real wages growth suggests that the Fed will achieve "lift-off" in rates as expected in the middle of this year.
The pace of the rise in rates after "lift-off" may be governed by US employment and price data in the second half of calendar 2015.
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