The latest jobs report released Friday shows average hourly earnings ticked up slightly in August, a sign that wages could be on the rise amid a tight labor market.
Average hourly earnings increased 2.9 percent over the last year, the largest annual wage growth since 2009. The problem for workers, however, is that inflation has risen to 2.9 percent as well, meaning that the inflation-adjusted “real” wage gain is zero over the past 12 months., according to the Bureau of Labor Statistics.
The economy also added 201,000 jobs in August, higher than what economists predicted.
But the jobs numbers for June and July were both revised downward for a combined 50,000 fewer jobs.
With the revisions, 185,000 jobs were created per month since June, in line with the trend in monthly job gains since 2010. The national unemployment rate remained unchanged, at 3.9 percent.
Signs of higher wages
The economy is at or near full employment, depending on who you ask, so economists have been expecting wages to rise for some time.
Businesses “are starting to hear the message loud and clear that in order to retain top talent they need to pay higher wages,” said Scott Waletzke, the senior director of recruitment strategy at Adecco Staffing, one of the world’s largest temp staffing firms.
Waletzke said employers are also offering other incentives that might not show up in the Bureau of Labor Statistics data, such as increased wellness benefits and child care.
An almost certain Federal Reserve rate hike
With steady August jobs numbers, the Federal Reserve will almost certainly hike interest rates at its meeting later this month.
“There is certainly nothing in this report that would tell the Fed they shouldn’t move ahead with their plans to raise rates,” said Betsey Stevenson, a labor economist at the University of Michigan who served on the White House Council of Economic Advisers during the Obama administration.
The Federal Reserve could raise interest rates a second time in December, but that prospect is less clear.
The other unemployment numbers to watch
There are a few other employment numbers to keep an eye on.
The unemployment for African Americans dropped from 6.6 percent in July down to 6.3 percent in August. But it is still higher than the 5.9 percent rate reached in May.
The unemployment rate for people without high school diploma also ticked up from 5.1 percent in July to 5.7 percent in August.
Stevenson said economists will be watching whether employers are more willing to hire those groups of people given the limited number of available workers.
There is also a broader unemployment statistic kept by the Bureau of Labor Statistics known as the U6. That includes people who are unemployed, working a part-time job when they want a full-time job, or have dropped out of the labor force because they have become discouraged.
That unemployment rate was 7.4 percent in August, down from 8.6 percent a year ago.
“That really gives you a sense of how the labor market has tightened,” Stevenson said.
Sectors with the biggest gains and losses
Industries such as health care, business services and wholesale trade saw significant job gains over the past month.
Notably, the manufacturing sector lost about 3,000 jobs in August.
While economists caution against reading too much into the numbers, Mark Hamrick, a senior economic analyst at Bankrate.com, said industry watchers will be keeping an eye on whether the manufacturing sector continues to shed jobs in response to rising trade tensions.