January job gains, wage increases show US recovery getting stronger, closer to full health

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FILE - In this Dec. 14, 2011, a line worker assembles a 2012 Ford Focus at the Ford Michigan Assembly plant in Wayne, Mich. The jobs report on Friday, Feb. 6, 2015, signaled that raises have finally begun to flow through an economy in which, once you factor in inflation, most people earn less than when the Great Recession struck in 2007. Ford has announced that up to 500 of its lowest-paid factory workers will receive a 48 percent pay raise to $28.50 an hour. Other major companies, including Aetna and the Gap, have also announced pay increases. (AP Photo/Paul Sancya)


In this Friday, Jan. 23, 2015 photo, job applicant Rafael Ferrer, 49, left, shakes hands with a representative of the Hilton Bentley Miami Beach hotel during a job fair at the Hospitality Institute, Friday, Jan. 23, 2015, in Miami. The institute is part of Miami Dade College which offers training and job placement assistance in the hospitality industry to inner city residents. The Labor Department releases employment data for January on Friday, Feb. 6, 2015. (AP Photo/Lynne Sladky)


WASHINGTON — A resurgent job market in January signaled that the U.S. economy is finally regaining the kind of strength typical of a healthy recovery — with hiring accelerating, wages rising and people who had given up their job hunts starting to look again.

Freer-spending consumers and steady economic expansion have boosted hiring for the past three months to the most robust pace in 17 years.

In January, employers added 257,000 jobs, after 329,000 in December and a sizzling 423,000 jobs in November, the government reported Friday. The November and December gains were much higher than the government had first estimated.

"The labor market was about the last thing to recover from the Great Recession, and in the last six months it has picked up steam," said Bill Hampel, chief economist at the Credit Union National Association. "The benefits for the middle class are now solidifying."

The average hourly wage rose 12 cents to $24.75 in January, a jump of 0.5 percent — the sharpest since 2008. In the past year, hourly pay, which has long been stagnant, has risen 2.2 percent. That's well above inflation, which rose just 0.8 percent in 2014.

The accelerating job and pay growth now make it more likely that the Federal Reserve will begin raising the short-term interest rate it controls by midyear.

Paul Ashworth, chief U.S. economist at Capital Economics, predicts that the Fed will raise rates from record lows in June.

"Employment growth is clearly on fire, and it is beginning to put upward pressure on wage growth," Ashworth wrote in a research note. "The Fed can't wait much longer in that environment, particularly not when interest rates are starting at near zero."

Indeed, investors responded to the better-than-expected figures by selling U.S. Treasurys, sending yields up, a sign that many think a Fed rate hike might be more imminent than they thought before. The yield on the 10-year Treasury note rose to 1.94 percent from 1.81 percent shortly before the jobs report was released.

Stock investors appeared nervous about a Fed rate increase, which could pull down stock prices. The Dow Jones industrial average closed down 60 points, or 0.3 percent, to 17,824.

The unemployment rate rose last month to 5.7 percent from 5.6 percent. But that occurred for a good reason: More than 700,000 Americans — the most in six years — began looking for jobs. Not all of them found work, which swelled the number of unemployed. The influx of job hunters suggested that Americans have grown more confident about their prospects.

Fueling the burst of hiring has been a pickup in economic growth and falling gas prices that offered Americans more money to spend. The economy expanded at a 4.8 percent annual rate during spring and summer, the fastest six-month pace in a decade, before slowing to a still-decent 2.6 percent pace in the final three months of 2014.

There are now 3.2 million more Americans earning paychecks than there were 12 months ago. That additional cash tends to boost consumer spending, which drives about 70 percent of economic growth.

Americans are feeling better about the economy. Consumer confidence jumped in January to its highest level in a decade, according to a survey by the University of Michigan. And consumers increased their spending during the final three months of last year at the fastest pace in nearly nine years.

A more confident, free-spending consumer could lend a spark that had been missing for most of the 5½-year-old recovery. Americans have been largely holding the line on spending and trying to shrink debt loads. Signs that they're poised to spend more have boosted optimism that the economy will expand over 3 percent this year for the first time in a decade.

Companies that benefit most directly from consumer spending have ramped up hiring since the fall, when gas price savings began to pile up in Americans' bank accounts. Retailers added 45,900 jobs in January, hotels and restaurants 37,100.

Though jobs in those industries typically offer lower wages, companies have boosted pay as they have scrambled to fill openings. Hourly pay has risen 3 percent in the past year for retailers and 3.4 percent for hotel and restaurant employees.

When the year began, 20 states raised their minimum wages, a trend that might have contributed to January's sharp overall pay gain. Some companies, including Aetna and the Gap, have also announced wage increases for their lowest-paid employees.

Construction companies have been a source of big job gains. They've added 308,000 jobs in the past 12 months, nearly 10 percent of the overall gain.

Hiring is unlikely to remain at the blistering pace of the past three months, economists said, though it should stay solid.

Mark Vitner, an economist at Wells Fargo, says shifts in how Americans shop might have given the job market a temporary lift.

Online shopping has boosted warehousing, shipping and trucking jobs during the winter shopping season, Vitner said. The government tries to adjust for those seasonal changes, but its accuracy may be off, particularly because the trends are so recent.

Michael Gapen, chief U.S. economist at Barclays, forecasts that monthly job growth will fall back to a still-healthy average of 225,000. That should lift wage gains to an annual rate of 3 percent by year's end.

"We do appear to have hit a new stride," said Diane Swonk, chief economist at Mesirow Financial.


Associated Press economics writers Josh Boak and Paul Wiseman contributed to this report.

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