WASHINGTON (AP) – Pay raises, the U.S. economy’s Achilles’ heel in its long recovery from the Great Recession, finally showed signs of accelerating last month – a trend that fanned inflation fears and sent bond yields rising and stocks sinking.
Wages grew in January from a year ago at the fastest pace in eight years, evidence that low unemployment is forcing some employers to pay more to keep or attract workers. The question is whether the gains will endure and spread throughout the economy.
U.S. employers added a robust 200,000 jobs in January, and the unemployment rate stayed at a low 4.1 percent for the fourth straight month, the Labor Department said Friday. But investors saw the wage growth as cause for concern. Higher pay could help swell inflation and spur the Federal Reserve to quicken its pace of interest rate increases in coming months.
The 10-year Treasury note rose to 2.83 percent, from 2.79 percent before the jobs report was released. And the Dow Jones industrial average tumbled 666 points, or 2.5 percent, partly on the prospect of sharply higher rates and partly on poor earnings reports from Google’s parent company Alphabet, Exxon Mobil and Chevron.
“Everyone has been rooting for wage growth, but be careful what you wish for,” said Josh Wright, chief economist at recruiting software company iCIMS.