We can finally say it with certainty: The economic recovery is happening—and it keeps getting stronger. The economy added 257,000 jobs in January, the Labor Department reported Friday morning. The unemployment rate ticked up a notch, from 5.6 percent to 5.7 percent. But that’s actually good news because it resulted from more people entering the labor market. The labor force participation rate increased from 62.7 percent to 62.9 percent.
Even better, the November and December jobs numbers were revised up 147,000, a huge change. Job growth over the past three months has now averaged 336,000. Here’s the three-month moving average that shows just how a massive a surge that is:
But if you have been following job reports over the past year, you know that the headline jobs number is not the most meaningful data point. What we really have been looking for is wage growth—and that finally happened in January as well. The Labor Department reported that wages rose 0.5 percent in January. Over the past year, they’ve now increased by 2.2 percent. Those aren’t earth-shattering numbers by any means. But they are a sign that the wage story is finally turning around. Employees are finally gaining more leverage in the labor market to demand higher wages, and employers are having no choice but to give them to them.
There’s little not to like about this report. In fact, there’s little not to love about this report. As always, it’s important to take these numbers with a grain of salt. The Labor Department will revise them when it releases the February jobs report. Sometimes those revisions are significant. But it’s also clear that the economy is growing at a strong pace right now. And for the first time, we have hints that the recovery will do more than boost the pockets of big corporations. It looks like it might just help Main Street as well.
Whether that actually happens will depend significantly on the Federal Reserve. The Fed has kept short-term interest rates near zero since 2009 to encourage businesses to invest and consumers to buy houses and cars. But as the economy recovers, it will end that zero-interest-rate policy so as not to risk rising inflation. Most financial analysts expect that to happen later this year. That will be a pivotal moment for Fed chair Janet Yellen. Raise interest rates too soon and the Fed will stifle the recovery and prevent wage growth from reaching millions of Americans. Raise rates too late and moderate inflation could occur.
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