(Bloomberg) — Employers in the U.S. added more jobs than forecast in January, capping the biggest three-month gain in 17 years, and workers’ earnings jumped.
The 257,000 advance in payrolls last month followed a 329,000 gain in December that was bigger than previously reported, figures from the Labor Department showed Friday in Washington. The median forecast in a Bloomberg survey of economists called for a 228,000 increase. The unemployment rate climbed to 5.7 percent as the improving job market lured more Americans into the labor force.
A stronger economy has encouraged companies to boost hiring, creating a virtuous cycle of growth as Americans spend newfound incomes on goods and services. Sustained job growth will probably help assure Federal Reserve policy makers that the expansion is well-rooted and can withstand an increase in interest rates later this year.
“We’re at a phase of the cycle where the labor market is shoring up household finances and that generates more demand, and it becomes a very self-reinforcing cycle in a positive way,” Aneta Markowska, chief U.S. economist at Societe Generale in New York, said before the report.
Average hourly earnings jumped 0.5 percent, the most since November 2008, from the prior month. They were up 2.2 percent over the past year, the biggest increase since August.
Payroll gains averaged 336,000 over the last three months, the strongest since a comparable period ended in November 1997.
A striking aspect of the report was an upward revision to prior months. Employment in November was revised up to a 423,000 gain, the most since May 2010. Private payrolls, which exclude government agencies, soared 414,000 that month, the biggest advance since September 1997.
Job gains in January were led by retailers, construction firms and health-care companies.
Estimates in the Bloomberg survey of 98 economists for payrolls last month ranged from increases of 180,000 to 286,000. To calculate the data, the Labor Department surveys businesses and households for the pay period that includes the 12th of the month.
The agency’s survey of households, used to derive the unemployment rate, showed about 1.05 million people entered the labor force and 759,000 found work. These numbers also reflect new estimates on the size of the population.
The participation rate, which indicates the share of working-age people in the labor force, increased to 62.9 percent from 62.7 percent in December.
Private hiring increased by 267,000 in January after an advance of 320,000 the month before. Employment at retailers climbed about 46,000 last month, while payrolls in health care and social services rose by almost 50,000.
Construction companies added 39,000 workers and factories took on 22,000. Not all industries boosted payrolls. Employment fell in transportation, mining and at temporary-help agencies.
The average workweek for all employees held at 34.6 hours, the Labor Department’s report showed.
Even as job growth has firmed over the past year, a pickup in wage growth has been slower to take hold. Fed policy makers are closely monitoring worker pay as they consider a time table for their first increase in borrowing costs since 2006.
Falling commodity costs and weakness in overseas economies have been slowing inflation, which is below the central bank’s target of 2 percent.
Inflation “is anticipated to decline further in the near term,” the Federal Open Market Committee said in a Jan. 28 statement. Meanwhile, “labor market conditions have improved further, with strong job gains and a lower unemployment rate.”
Economists surveyed by Bloomberg from Jan. 9 to Jan. 14 projected the economy will add 230,000 jobs per month this year, with an average unemployment rate of 5.4 percent.
Staffing firm Robert Half International Inc. has been among companies seeing the improvement in the labor market firsthand. Sales and earnings at the Menlo Park, California-based company that works on temporary and permanent placements beat analysts’ estimates amid growing demand for its services.
“The U.S. labor market has strengthened in recent months, and skill shortages persist in professional disciplines such as accounting and information technology,” Chief Executive Officer Harold Messmer said on a Jan. 29 earnings call.
The company is seeing “classic signs that the labor markets are heating up, that candidates are getting tighter, that a larger and larger premium is placed by our clients on recruiting of candidates,” the company’s Chief Financial Officer Keith Waddell said on the call.
The Labor Department’s figures also included its annual benchmark update, which aligns employment data with corporate tax records. The revision showed payrolls grew by an additional 67,000 workers, on an unadjusted basis, from April 2013 to March 2014.
Additionally, the agency incorporated new Census Bureau population estimates into the household survey. The adjustment boosted the estimated size of the labor force by 348,000.
–With assistance from Kristy Scheuble in Washington.