Job growth and worker wages climbed strongly in December, suggesting the labor market remains very tight.
This could be a signal that the economy remains robust, despite a slump in housing. However, some expressed concerns that the increase in wages, which was made its largest jump since April, could mean inflationary pressures are rising.
In December, nonfarm payrolls rose by 167,000 jobs, the biggest advance in three months, the Labor Department said. Average hourly earnings rose by 8 cents, or 0.5%, to $17.04. Meanwhile, the unemployment rate held steady from November at a historically low 4.5%.
"Without a doubt, the wage picture will be regarded as threatening by Fed hawks," Pierre Ellis, a senior economist at Decision Econmics, told Reuters. "There's no sign of diminished call on labor market resources even as the economy grows at a relatively moderate rate. The Fed will be worried that productivity growth is in a nosedive."
However, if the wage gains are coupled with productivity gains, the increase in wages is not inflationary, said John Silvia, chief economist on CNBC's "Morning Call."