Job and Wage Gains as Americans Rejoin the Work Force

Job and Wage Gains as Americans Rejoin the Work Force

A worker on the roof of a construction project in Montclair

The economy barreled through the last three months with strong momentum, the Labor Department said Friday, as American employers added 257,000 jobs in January, wage growth rebounded and more people went looking for work in an improving labor market.

With new figures on the last two months of the year, 2014 turned out to be the strongest year for job gains since 1999. The government revised upward the already healthy figures for payroll gains in November and December, increasing their estimate by 147,000. All told, the economy added, on average, 260,000 jobs a month over the course of the year.

“This is the best employment report we’ve had in a long time,” said Guy Berger, United States economist at RBS. “The labor market looks like it’s in really good shape as we head into 2015.”

The Labor Department said on Friday that the unemployment rate inched up to 5.7 percent, from 5.6 percent. But even that apparent setback 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.

Average hourly earnings rose 0.5 percent in January, the biggest monthly gain in more than six years, though it followed a disappointing drop in December. Over the last 12 months, wages advanced at a 2.2 percent pace, significantly ahead of the inflation rate.

The overall picture was so strong, Mr. Berger said, that the Federal Reserve might begin its long-awaited move to raise short-term interest rates in June, a step many economists had been expecting to be delayed until September.

“I still think it will be September, but the odds of a June increase have gone up somewhat,” Mr. Berger added. “The fact that the economy didn’t lose a step in January bolsters the case that inflation could hit the Fed’s target.”

Other experts echoed Mr. Berger’s take. “Employment growth is astonishingly strong,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients immediately after the 8:30 a.m. release. “With every indicator we follow screaming that payrolls will be very strong for the foreseeable future, wage pressures will intensify.”