Average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $26 in January, following a 6-cent increase in December.
Over the year, average hourly earnings have risen by 2.5 percent.
The wage increase was revealed in government jobs data released Friday morning. It was the first monthly employment report since Donald Trump began his presidency, and showed the economy chugging along at a healthy pace.
The strengthening economy appears to be delivering wage gains. December showed the fastest wage growth in years, and analysts expected minimum-wage increases that went into effect in January to push worker pay up further.
Nineteen states introduced mandatory increases in wages paid to workers at or near the minimum wage, a change that affected millions of low-paid workers in fast-food, hotels and other industries.
Economists agree that the change will immediately translate into wage growth for some of the poorest Americans but are divided over how the change could affect hiring.
Standard economic theory suggests the move will encourage companies to pare back their payrolls and switch to automation to replace more expensive workers in the future. That would accelerate changes the economy is already seeing with, for example, the automation of food-ordering at fast casual restaurants and bag-checking at airports, said Mark Hamrick, senior economic analyst for Bankrate.com.
The minimum wage increases “should add a firm foundation for further wage growth, which is supported by a relatively healthy job market. But there’s no doubt that businesses will be further incentivized to explore efficiency gains, which can translate to increased automation,” he said.
Other economists say that a higher minimum wage would not have such a damaging effect on the labor market.
In a letter to President Barack Obama in 2014, more than 600 economists said that academic work in recent years has shown that an increase in the minimum wage had little or no effect on employment, and that putting more spending money into the pockets of low-wage workers could end up giving a small boost to the economy.
The broad minimum wage hikes last month could act as a natural experiment for testing these claims. Currently, 29 states and the District of Columbia requires companies to pay hourly wages higher than the federal minimum wage of $7.25 an hour.
Recent wages gains and the prospect of emerging inflation have helped strengthen the case for the Federal Reserve to continue gradually tightening monetary policy this year.
At a meeting earlier this week, the Federal Reserve choose to leave its benchmark interest rate unchanged, following a rate hike in December. The central bank has indicated that it will make three rate increases in 2017, though futures markets suggest the Fed will once again leave the rate unchanged when it meets in March. Instead, investors are expecting hikes in June and December.
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