Construction workers on a site in Olmsted, Ill. For the year as a whole, the gain in jobs is shaping up as the best in 15 years.
After
more than five years of elusive gains, ordinary Americans may finally
be about to see the benefits of the recovery where it really counts: in
their pocketbooks and wallets.
The
Labor Department reported Friday that employers added 321,000 jobs in
November — a much stronger number than expected — but perhaps even more
significant was the biggest gain in average hourly earnings since June
2013.
Hourly
earnings rose by 0.4 percent in November, double what economists had
been expecting. That gain in hourly pay was significantly above the
measly 0.1 percent increase in October, let alone the unchanged number
in September. At the same time, the number of hours worked ticked up by
one-tenth, adding to pay envelopes.
“The
pairing of strong hiring and wage gains is a really strong indicator of
the health of the economy,” said Tara Sinclair, chief economist at
Indeed.com, a leading job search website. “Now, we want to see people
coming back into the work force and also finding the right jobs for them
in terms of wages, skills, and hours.”
The
pickup in wage growth is coming as gasoline prices are plunging,
providing a double boon for consumers and retailers with the holiday
shopping season underway.
For the year as a whole, the gain in jobs, with one month still to go, is shaping up as the best in 15 years.
In economics most things cut both ways, however, and Friday’s report was no exception.
The
nascent labor market strength makes it more likely the Federal Reserve
will start raising short-term interest rates sooner rather than later.
Most economists expect the central bank to increase interest rates in
mid-2015, after leaving them near zero since the depths of the financial
crisis in late 2008. Some now argue that the Fed may move to raise its
key interest rate lever as early as March next year, but most are still
sticking with midyear.
As
positive as the figures for November were, one month’s data probably
isn’t enough to shift the Fed’s thinking, said Guy Berger, chief United
States economist at RBS. “You’d have to see these kinds of number over
the next three or four months, then March comes into play,” he said.
“Our view now is that the first rate hike will come in June.”
In
particular, Mr. Berger noted that there was a risk the jump in hourly
earnings represented a catch-up from weak readings in September and
October, rather than an inflection point. “The coming months will tell
us whether November was a fluke or the beginning of a sustained pickup
from the 2 percent annual wage gains we’ve had over the past four
years,” he said.
Although
the prospect of higher interest rates tends to make investors more
cautious, Wall Street rallied Friday, with traders figuring a better job
market and better-paid consumers outweighed whatever cooling effect
higher borrowing rates could have. In midday trading, major market
indices were up about 0.4 percent.
Although
government number crunchers try to adjust for seasonal swings like
hiring by stores ahead of the holiday, retailing still showed unusual
strength, adding 50,000 workers in November. That was more than twice
the average monthly gain of 22,000 retail workers over the last year.
Manufacturers,
often seen as a bellwether of swings in the broader economy and a
source of good blue-collar jobs, particularly for men, hired 28,000
workers in November. Health care employment jumped by 29,000, bringing
total gains in the field over the last 12 months to 261,000.
“In
one line: Spectacular and, more to the point, believable,” said Ian
Shepherdson, chief economist at Pantheon Macroeconomics. “The key thing
if you look at the run over the last few months is that this was a
number waiting to happen. We’ve had strong hiring indicators in a number
of surveys, and lower jobless claims, so sooner or later, we were going
to get a blockbuster number.”
Mr.
Shepherdson cautioned that while he was pleased by the stronger hourly
wage gain in November, he wanted to see it continue for several months
before he would be convinced higher wages were here to stay. “I’ve had
my fingers burned before, but the timing of this uptick is consistent
with other evidence of economic growth.”
The unemployment rate remained unchanged from last month at 5.8 percent, the Labor Department said Friday.
Government statisticians also revised upward the number of jobs added in September and October by 44,000, another good sign.
Wall
Street had been expecting payrolls to grow by 230,000 in November, with
the unemployment rate remaining unchanged. November’s gain was the
largest monthly jump in payrolls in nearly three years.
Despite
the deep economic frustration many Americans feel, evident in
everything from public opinion surveys to water cooler chats to last
month’s Congressional elections, the American economy has made
significant progress this year. In November 2013, for instance, the
unemployment rate was 7 percent, and the jobless rate five years ago
this month was 9.9 percent.
A
Federal Reserve survey of economic conditions across the country
released Wednesday reported healthier consumer spending in many regions,
likely as a result of lower gas prices, as well as gains in hiring.
Last
month, average gasoline prices in the United States fell below $3 a
gallon for the first time since 2010, amid a global plunge in crude
prices. Crude oil has kept dropping since then, to about $66 a barrel,
which suggests prices at the pump have further to drop.
As
of Monday, gas prices in the United States averaged $2.77 a gallon,
according to the Energy Information Administration, compared with $3.26
in December 2013. If gas prices stay where they are, the typical
household will save roughly $600 over the next 12 months.
The
overall expansion of the economy, as measured by the annual rate of
growth in gross domestic product per quarter, has also been picking up
steam.
In
late November, the Commerce Department revised upward its estimate of
the growth rate in the third quarter to 3.9 percent from an initial
figure of 3.5 percent. Output rose at an annual rate of 4.6 percent in
the second quarter, a snapback from the contraction in the first few
months of the year.
Wall Street, too, has been surging, with stocks hitting highs repeatedly in recent weeks.
Finally,
the section of the economy that helped lead the way down — housing —
has made an impressive recovery, at least in terms of home values, if
not new construction.
The
real estate sector could be dealt a setback if the Federal Reserve
raises interest rates next year, as is widely expected, but in more
affluent areas in particular, surging home prices have already helped
restore much of the confidence that was shattered in the financial
crisis of 2008 and the deep recession that followed.
So why the persistent gloom, not to mention anger?
Until
now, wage gains for the vast majority of Americans who kept their jobs
throughout the downturn and then the recovery have been very modest. The
2 percent wage increase over the last year is barely enough to keep up
with inflation or rising costs for many services, like education,
insurance and health care.
For
wages to show meaningful gains over a sustained period of time, as was
the case in the 1990s, the unemployment rate will have to drop further,
perhaps below 5 percent, said Diane Swonk, chief economist at Mesirow
Financial in Chicago.
“We’re not back to the 1990s, nowhere near it,” Ms. Swonk said. “But the good news is that we’re making progress.”
