Employers added a better-than-expected 257,000 jobs in January as the resurgent labor market began 2015 on a positive note.
The unemployment rate, which is calculated from a separate survey of households, rose to 5.7% from 5.6%, the Labor Department said Friday. That’s mainly because an additional 703,000 Americans, including previously discouraged workers, surged back into the labor force to look for work or take jobs.
Economists surveyed by Bloomberg expected employment gains of 230,000, according to their median forecast.
Also encouraging: Job gains for November and December were revised up by a total 147,000. November’s ‘s count was revised to 423,000 from 353,000 and December’s to 329,000 from 252,000.
The economy has added more than 1 million jobs just in the past three months – the best such stretch since 1997.
Wage growth, which has been sluggish despite strong payroll advances in 2014, picked up last month after falling in December. Average hourly earnings increased 8 cents to $24.75 an hour and are up 2.2% over the past year, up slightly from the 2% pace that has prevailed through most of the recovery. The average work week was unchanged at 34.6 hours.
“Employment growth is clearly on fire and its beginning to put upward pressure on wage growth,” Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a note to clients.
That, he added, should prompt the Federal Reserve to raise its benchmark interest rate in June to head off a pick-up in inflation. With low oil prices pushing down consumer prices, many economists recently speculated the Fed would delay raising short-term rates until later in the year or even 2016.
Businesses added 267,000 jobs last month on broad-based gains. Federal, state and local governments cut 10,000.
Health care led the advances with 50,000. Retailers added 46,000 jobs while construction, and professional and business services each added 39,000. Leisure and hospitality added 37,000; financial firms, 26,000; and manufacturers, 22,000.
Many experts expected the labor market to cool down after adding an average of 260,000 jobs a month in 2014, the most since 1999.
Several recent reports pointed to a slowdown. Surveys out this week of both the manufacturing and service sectors showed a drop in their employment indexes. And payroll processor ADP’s report this week estimated that businesses added 213,000 positions in January, below the 223,000 expected by economists.
Jim O’Sullivan, chief U.S. economist at High Frequency Economics, says winter weather was harsher in January than December, increasing the risk of a moderation in payroll gains. Also, seasonal adjustments of the raw data are particularly challenging in January because of the volatile weather.
The economy has slowed recently as the strong dollar makes U.S. products more expensive for foreign buyers and low oil prices prompt energy companies to scale back investment. Oil and gas extraction payrolls fell by 1,900 in January.
Consumers, however, have been buoyed by low gasoline prices and strong job growth. And with consumer spending accounting for more than two-thirds of the economy, many economists expect job growth to accelerate further this year.