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Job and Wage Gains Deliver a Promising Start for the Year

“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.”

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.

All Eyes on Wages

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.

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.

“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.”


6 Reasons That Pay Has Lagged Behind U.S. Job Growth

Average hourly earnings were 2.9 percent higher in January than a year earlier, a hopeful sign that wages might be gaining traction in a tight labor market. Their stubborn failure to do so is one of the mysteries of a recovery now in its ninth year.

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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.

Hunting for Workers

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.”

Industry Breakdown

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.

That trend continued in January. Construction companies added 36,000 jobs, and manufacturers tacked on another 15,000.

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.

Political Fallout

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.

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.

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.

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.)

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.

“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.”

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News credit : Nytimes

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