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. For all of 2014, the average monthly job gain was 250,000.
“This is the best employment report we’ve had in a long time,” said Guy Berger, U.S. economist at RBS. “The labor market looks as if it’s in really good shape as we head into 2015.”
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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 Labor Department said Friday that the unemployment rate inched up to 5.7 percent from 5.6 percent. But even that was mostly good news, as it was primarily because more Americans said they were encouraged enough by their job prospects to actively look for work.
The accelerating job and pay growth now make it more likely that the Federal Reserve will begin raising the short-term interest rate 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 increase is more imminent than they thought before. The yield on the 10-year Treasury note rose to 1.96 percent, up 0.14.
Stock investors appeared nervous about a Fed rate increase, which could pull down stock prices. The Dow Jones industrial average closed down 60.59, or 0.34 percent, to 17,824.29. The S&P 500 index fell 7.05 to 2,055,47.
A few other signals are still flashing yellow, however. Data last week showed economic output grew at a slower-than-expected 2.6 percent rate in the fourth quarter of 2014.
And on Thursday, the government reported a big jump in the country’s trade deficit in December, as imports surged and exports fell. With the dollar’s gaining strength and the euro and other currencies’ weakening, the trade balance may continue to weigh on the economy in 2015.
Economists had been looking for a gain of 230,000 jobs last month, but statistical quirks and the end of the holiday retail season have traditionally made January a difficult month for experts to get right ahead of time.