The U.S. Bureau of Labor Statistics (BLS) reported last week that average hourly earnings increased by 12 cents from December to January ($24.63 to $24.75), but U.S. Department of Treasury Secretary Jacob Lew said on Monday more wage growth is needed.
Lew told CNBC on Monday that even though the economy has experienced sustainable job growth – a higher-than-expected 257,000 jobs were added in January and a monthly average of 336,000 jobs created for the last three months, according to BLS – better wage growth is needed for the nation's economy to return to normal.
"Over the last year, we've seen average wages going up, a little over 2 percent," Lew said in the interview. "We need more wage growth than that for people to really feel it, but it's something to be that's starting to be something that's a trend in the right direction. I think we've got to do everything we can to help drive that trend forward."
According to analysts, such wage growth may be on the horizon for the coming year. The 12-cent increase reported by BLS correlates with the findings of Fannie Mae's January National Housing Survey released on Monday, which indicated that 29 percent of Americans said their household income is "significantly higher" than a year ago and that 48 percent surveyed expect to see their finances improve in the coming year.
"A 0.5 percent jump in average hourly earnings was a welcome signal to American workers that recent months of robust hiring may finally lead to a much needed rising trend in wage gains," Fannie Mae chief economist Doug Duncan said. "Together, our survey results and (the BLS) jobs report strengthens our expectation that stronger hiring and firming income growth will be the primary catalysts for a faster pace of housing recovery in 2015."
Analysts agree that higher wage growth is necessary for the nation's economy – and hence the housing market – to fully recover from the bust of 2008, due to the fact that wage growth is needed to keep up with rising home prices.
"Overall, affordability for buyers in most markets will be well maintained in the context of strong job and income growth," CoreLogic chief economist Frank Nothaft said late January.
The final January gauge of the University of Michigan/Thomson Reuters consumer sentiment index turned in its highest reading in 11 years (98.1) largely due to an increase in personal finances – four out of 10 surveyed cited finance gains as the reason for the increased level of confidence, particularly among households with an annual income of $75,000 or less. While that survey estimated an annualized growth rate in hourly earnings of only 1.9 percent, Friday's 12-cent gain represented an annualized growth rate ahead of that pace at 2.2 percent.
"Consumers have now turned to wages rather than jobs as the primary characteristic they used to judge the performance of the economy," Richard Curtin, chief economist for Surveys of Consumers.
"It is time to say that we've turned a corner and we're now in an economy that's growing," Lew said. "It has sustainable growth. It's growth that showing up not just in businesses but in jobs and we're now seeing wages go up a bit. I think this is a trend that needs to continue. We need to make sure that we do what we can to continue the growth. I think we're getting some benefit now from lower oil prices in terms of the economy getting a boost on top of that, so I'm feeling pretty confident that we're looking at a good period ahead."