On Friday, the Labor Department reported that employers added another 252,000 workers to their payrolls in December, capping a year in which total employment rose by 2.95 million, the largest advance since 1999.
The unemployment rate also improved, edging down last month to 5.6 percent from 5.8 percent in November. The rate plunged just over a full percentage point between 2013 and 2014, the largest decline since 1984.
But a drop in average hourly earnings last month, after a healthy gain in November, sidetracked hopes that a tighter labor market was beginning to lead to broader wage gains.
“The rising tide of this economic wind at our back has to lift more boats,” Secretary of Labor Thomas E. Perez said in a telephone interview. The nation’s wage situation, he said, is a crucial part of the “unfinished business” of the nation’s economic recovery, which began around the middle of 2009.
Diane Swonk, chief economist at Mesirow Financial, said the decline in wages came despite December gains in construction and health care jobs and other jobs that typically offered good salaries.
“This is still a buyer’s market in terms of labor,” she said. “For all the good news on unemployment and the number of jobs we’ve created, if these wage numbers are to be believed, employers still have their pick.”
For the Federal Reserve, the mixed message from the jobs reports makes the timing of its first interest rate increase in years more problematic. Robust job growth and the lowest unemployment rate since June 2008 suggest a rapidly improving economy, possibly persuading the Fed that it should move sooner rather than later to raise rates to lessen the risk of speculative bubbles or future inflation.
“If the activity data continue to improve, as we expect,” Paul Dales, a senior economist for Capital Economics, said in a note to clients, “then the Fed may not wait for wage growth to rise and could still raise rates as soon as March.”Yet as long as wages lag and ordinary Americans are not enjoying much of the fruits of an improving economy, the Fed should stand pat, many economists say.
“The economy clearly has no wage or price pressures that would point towards an early liftoff on interest rates,” Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, wrote in a blog post.
William Spriggs, chief economist for the A.F.L.-C.I.O., said he worried that the Fed would raise interest rates too soon, hurting small businesses that could hire more workers as long as they maintained ready access to low-interest loans.
“Every dollar gained is a dollar lost, but the benefits are widespread and the losses are concentrated and will be small,” Mr. Logan said.
There are other encouraging signs that the recovery is on solid footing.
“At the current pace of job growth, the economy should be closing in on a 5 percent unemployment rate by this time next year, which is consistent with full employment,” said Mark Zandi, chief economist at Moody’s Analytics. “Wage growth should also pick up more broadly in coming months.”
Better, higher-paying jobs are already are being created. Business and professional services have been adding jobs in recent months, though last month many were in the lower-paying administrative category.
Hiring has been vigorous in the health care industry, and last month construction jobs increased. Manufacturing job growth has more than doubled to 16,000 a month in the last year, and those jobs generally have an average weekly paycheck about $170 higher than other private sector jobs, Jason Furman, chairman of the president’s Council of Economic Advisers, said in a blog post.
Mr. Furman said the estimated 0.7 percent increase in real earnings in 2014 is a bit higher than the average annual increase of 0.5 percent from 2000 through 2007, the period of the last expansion. He calculated the figures using the Consumer Price Index inflationary measures through November, as well as consensus projections for December.But there is more work to be done to raise wages and address longer-standing challenges around family incomes,” Mr. Furman said.
In addition to December’s new jobs, the number of jobs created in November was revised upward to 353,000 from 321,000.
Overall job growth last year averaged 246,000 a month, after 194,000 a month in 2013.
