US jobs market 'on fire' as growth hits 17-year high

Job creation in November and December had been considerably stronger than previously believed

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There was some welcome economic news for Barack Obama yesterday as data released on Friday showed the number of new jobs created in January had totalled 257,000 – a higher figure than anticipated and one which he said underlined the country’s ongoing economic recovery.

Wages increased by the highest amount in six years.

The good buzz created by January’s figures was then cemented by the revelation that job creation in November and December had been considerably stronger than previously believed.

The updated figures from the US Department of Labour showed employers added 414,000 jobs in November. Meanwhile, job growth in December was revised sharply upwards from 329,000 from 252,000. That made the three-month growth performance the best in 17 years.

The figures released on Friday revealed that the average hourly wages increased 12 cents in January to $24.75, the biggest gain since September 2008. In the past year, hourly pay has increased 2.2 per cent. That is ahead of inflation, which rose 0.7 percent in 2014.

“Employment growth is clearly on fire and it is beginning to put upward pressure on wage growth” said Paul Ashworth of Capital Economics.

At the same time, the unemployment rate last month rose to 5.7 per cent from 5.6 per cent. Yet analysts said that had increased because more Americans had returned to the potential labour force.

“For the average American, it’s certainly good news – 2015 is going to be the year of the American consumer,” said Russell Price, senior economist at the financial services firm Ameriprise. “With job growth being strong, we’re going to see a pick-up in wages and salaries.”

Investors immediately responded to the better-than-expected jobs figures by selling ultra-safe US Treasury bonds, sending yields up. The yield on the benchmark 10-year Treasury bond rose to 1.88 per cent from 1.81 per cent shortly before the employment report was released.

The jobs figures come at a time when oil prices are at their lowest in many years, factors which together are likely to further push consumer spending, said analysts.

A recent study by the University of Michigan suggested that consumer confidence was now at its highest level in a decade. Americans increased their spending during the final three months of last year at the fastest pace in nearly nine years.

The Federal Reserve is closely monitoring wages and other job market data as it considers when to begin raising the short-term interest rate it controls. It is currently at a record low, close to zero.

The Fed has kept rates at record lows for more than six years to help stimulate growth. Most economists think the central bank will start boosting rates as early as June.