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Wage growth up

Friday, February 02, 2018

WASHINGTON - US private sector payrolls rose at a brisk pace in January as hiring increased across the board despite unseasonably cold weather, pointing to sustained labour market strength at the start of the year.

The robust jobs market is gradually putting upward pressure on compensation, with other data on Wednesday showing a solid increase in labor costs in the fourth quarter.

Tightening labour market conditions and signs of a pickup in wage growth are likely to be welcomed by Federal Reserve officials who have long expressed concern about benign inflation.

In a statement at the end of a two-day policy meeting on Wednesday, Fed officials said they expected annual inflation to "move up this year and to stabilise" around the US central bank's 2 per cent target.

The Fed left its benchmark overnight interest rate unchanged. US financial markets expect a rate hike in March.

The US central bank has forecast three rate increases this year after lifting borrowing costs three times in 2017.

"It's a myth that wages are not going up so the Fed doves can stop thinking there is slack in the labor market," said Chris Rupkey, chief economist at MUFG in New York.

"We now expect the Fed can lift rates four times this year and not the three rate hikes they penciled-in in December."

The ADP national employment report showed private sector employment rose by 234,000 jobs in January, beating economists' expectations for an increase of only 185,000.

December's payrolls count was revised down to 242,000 from 250,000.

Manufacturing added 12,000 jobs last month and construction payrolls increased 9000 despite bitterly cold temperatures in many parts of the country.

There were also widespread job gains in the private services sector. The ADP report is jointly produced with Moody's Analytics.

It, however, has a poor record predicting the private payrolls component of the government' more comprehensive employment report.

The Department of Labor will publish January's employment report on Friday.

According to a Reuters survey of economists, nonfarm payrolls probably rose by 180,000 jobs in January after increasing 148,000 in December.

The unemployment rate is forecast unchanged at a 17-year low of 4.1 per cent.

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