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US wages in December rose at the fastest pace since mid-2009, according to the Bureau of Labor Statistics’ employment report released Friday.
Average hourly earnings increased by 2.9% year-on-year. The economy added 156,000 jobs in December, which is fewer than expected but extends the record streak of job creation in the US.
Economists had forecast that nonfarm payrolls increased by 175,000.
The unemployment rate rose to 4.7% from 4.6% as the size of the labor force increased.
The labor-force participation rate ticked up to 62.7% from 62.6% but remained near its lowest level in several decades. There are several causes for the decline. An analysis in August by the President’s Council of Economic Advisers suggested that about half of the drop had come from structural, demographic factors, with the baby boomers, an immense cohort of Americans, starting to retire.
It was the final jobs report of Barack Obama’s presidency, though the survey week for the January report will be before President-elect Donald Trump’s January 20 inauguration. Since Trump’s electoral victory, various surveys of consumer confidence have shown that Americans’ optimism about the labor market has improved.
The jump in wages could have been partly because the employment survey is usually conducted during the week of the 12th of the month. The 12th was a Monday in December but a Saturday in November, so people who get paid bimonthly and on the 15th of the month were counted in December.
Still, employers are having a harder time finding qualified people to hire, particularly for skilled jobs. Nonfarm payrolls rose by about 2.2 million in 2016, the lowest since 2012. The tighter labor market could bring bigger paychecks for existing employees.
The 2.9% rise in December average hourly earnings “might put a little bit more pressure on the Fed to accelerate the path [of interest rate hikes], but I really don’t think it’s going to be that significant a push,” said Dan North, chief economist at Euler Hermes North America. “It will increase the debate – the hawks will start pointing to that number,” he told Business Insider.