In a report issued by the Bureau of Labor Statistics, non-farm Jobs were estimated to have grown by 200,000 in January and the unemployment rate remained unchanged at 4.1%. Wages also increased by 2.9% and hourly wages rose by 9 cents, according to the Washington Post. These are all good signs that the US economy is continuing to improve, and, according to Reuters, this is the largest annual gain in more than 8 years.
Several states, such as Ohio and Florida, have increased the minimum wage. According to economists, this explains much of the recent wage increase.
Another reason could be that employers are competing for a limited pool of potential employees. The raises coming from recent tax cuts could have also contributed, according to Fox News.
January's job growth was broad. The largest gain was in the construction sector which grew by about 36,000 jobs due to increases in remodeling projects and a demand for new homes. Manufacturing also saw an increase in jobs due to strong international and domestic demand.
A tight labor market
As jobs continue to grow, the pool of potential employees shrinks. Employers are competing harder for potential workers and more pay increases are likely. As the number of potential employees shrinks, employers are likely to turn to more flexible hiring approaches such as waving educational requirements and considering people who have criminal records.
In a tight Job Market, people who aren't typically thought of as being very employable become desirable as companies compete for limited labor.
Companies aren't just raising wages, but are also offering perks to entice potential workers. More companies such as Starbucks have announced perks for hourly workers such as paid parental leave.
Other companies are focusing on cross-training workers and attempting to improve morale in an effort to get current workers to stay without having to raise pay or having to hire new workers.
Future predictions
Though this growth is mostly a good thing, some economists are worried that it may not be sustainable if the economy grows too fast.
According to the Chicago Tribune, the economy is expected to grow by 2.3-3% this year.
Due to this growth, the Federal Reserve is likely to raise short-term interest rates more frequently than planned in an effort to slow it down, reports Business Insider. News of the wage growth was also a contributing factor to the recent decline in the Dow Jones industrial average due to the prospect of higher interest rates, according to the Chicago Tribune.
Economists predict the job growth to slow as the pool of available employees shrinks. Many companies are experiencing difficulty in terms of finding qualified workers, forcing some to raise wages in an effort to entice potential workers. Wages are expected to increase as Wallmart raises hourly wages for its entry-level employees in the US.
