US stocks opened stronger Friday morning behind solid payrolls data from the Labor Department, according to The Wall Street Journal. Employers added 321,000 nonfarm payrolls in November for the strongest month of employment since January 2012. The US economy is on pace for its best year of job creation in 15 years.
Friday, December 5, 2014
The S&P 500 opened 0.1% higher, while the Dow and Nasdaq both posted 0.2% gains.
Job creation continues to rise, wage growth still struggles
The Wall Street Journal reported that September and October combined to post 44,000 more jobs than analysts had initially expected. That trend was even more evident in November, as economists predicted a 230,000-job increase – well short of the actual number.
While job growth has been robust, wage growth did not follow suit. Hourly earnings for private-sector employees have increased by only 2% in the last five years. However, analysts are optimistic that wages will ultimately rise as the labor market tightens. In November, wages gained a consensus 0.2% - a small but encouraging step forward.
“For the first time in a while there was even some sign of stronger wage growth, although the 0.4% rise in average hourly earnings [consensus 0.2%] was still only good enough for a tame 2.1% year-over-year rate,” Andrew Grantham of CIBC WM Economics told MarketWatch. “The Fed may want to see further signs of wage growth picking up before hiking, but that could well happen sooner than many expect if the current momentum in hiring is maintained and the underemployment rate continues to fall.”
Economists hoped the strong employment data would encourage the Federal Reserve to raise interest rates sooner rather than later. As it stands, the rate hike will likely come sometime in 2015, but the Fed has given no indication of a specific time.
New York Federal Reserve President William Dudley said on Monday that unemployment was still too high and inflation rates were not high enough, so a mid-2105 inflation increase is likely.
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