Friday’s Jobs Report was a huge beat.
The economy created 280,000 jobs in May, higher than the 226,000 estimate.
Wages are growing, too.
Average hourly earnings increased by 3 cents to $US24.87. That represents a 0.3% rise month-over-month, slightly higher than the 0.2% estimate. Year-over-year earnings rose 2.3%, above the 2.2% estimate.
Over the last three months, that trend is even higher:
Average hourly earnings rose a tad more than expected (+0.3%). Over the past three months, they’re growing at an annualized rate of 2.9%.
— Justin Wolfers (@JustinWolfers) June 5, 2015
In April, average hourly wages increased by only 0.1% month-over-month.
Wage growth indicates tightness in the labour market, as it often means that employers feel like they have to pay more to attract talented employees. Even as the economy has been growing at a steady clip for the last several months, averaging above 200,000 jobs per month, the wage numbers have continues to basically flatline.
This month’s number is pretty good. Not great, but pretty good. It finally shows a little bit of the wage growth that people have been looking for, particularly after some anecdotal evidence that employers are feeling the pressure to hike pay. In the last several months, huge retailers and chain restaurants like Walmart, Target, McDonald’s, and the Cheesecake Factory have all announced plans to raise wages for at least some of their workers.
Earnings growth is one of the last pieces of the economic puzzle that Fed Chair Janet Yellen has indicated the central bank is still looking for before deciding to raise rates.
We’re still not quite there, but today’s number shows that we might at least be getting close.