This morning’s report on employment from the Bureau of Labor Statistics showed an economy strengthening more rapidly than even optimistic economists believed. For January the BLS reported 257,000 new jobs, well above the estimates. More importantly, the BLS revised its earlier estimates for November and December to 329,000 and 423,000 respectively. That is 147,000 more jobs than reported in an already strong fourth quarter. The average monthly jobs gain for that quarter was 336,000, the highest since 1997.

As upbeat as the hiring data was, the report’s only negative note was actually the most positive. Unemployment rose from 5.6% to 5.7%. That uptick in unemployment was due to over 700,000 workers returning to the market. While many of those returning did not yet find employment, the labor participation rate jumped to 62.9%.

Investors may react to the news negatively because it may signal an earlier move by the Federal Reserve to raise interest rates but as a barometer on the health of the economy, the increased pace of hiring has little but positive ripples.

The government’s December 23 final estimate of GDP growth for the third quarter was a massive 5.0% surprise to the upside for the economy. The original estimate in October was 3.1%, which was later upped to 3.9% in November when the Commerce Dept. uncovered surprisingly higher healthcare, consumer and business spending. Using a more thorough survey methodology, Commerce research showed that those estimates were low as well.

The big jump in the third quarter can be attributed to higher business investment, which bodes well for construction and real estate. The biggest driver was the jump in consumer spending, which is a double-edged sword. Here’s what a closer look shows:

Consumer spending has risen somewhat because of better confidence in the future but most of the increase is probably related to the plunge in gasoline prices. The increase in consumer spending was 3.2% or slightly less than $100 billion in the quarter. Gas prices have dropped almost 90 cents during the quarter. The rule of thumb historically is that one penny in gas price decline yields a billion dollars in spending increase. That formula would explain most of the spending increase.

Consumers could also have used that increased disposable income to save more or pay down more debt. Neither of those things happened in the third quarter; in fact, the savings rate declined to 4.1%.

The last time that GDP growth was as strong as the past six months was in late 2003, just before the economy took off. That boom was fueled by consumers, especially consumers using their home equity as ATM’s for depreciating assets or non-assets like vacations. No one expects a repeat of that foolishness again, especially since banks can’t really do what they did in 2005-2006. At the same time, lenders need a place to use cash and Fannie/Freddie are looking at ways to get 97% loan-to-value deals to “qualified” buyers to stimulate home ownership. That’s a huge mistake and is exactly how the housing bubble started. Perhaps we could trust the GSE’s to maintain strict standards but I would rather not.

Better that the next few quarters cool off if that is what is in the cards. the rest of the world is in a bad economic state, which makes investing in U. S. bonds or real estate very attractive. That’s a good thing for our economy.

Friday’s jobs report was slightly below the estimates from analysts but still registered more than 200,000 new jobs for the ninth straight month and job growth in private sector for 56 consecutive months. The BLS data showed 214,000 new jobs across all sectors and unemployment declining to 5.8%. This data is on the heels of ADP’s report earlier this week of private payroll employment growth of 230,000 jobs in October.

Among economists there is a sentiment that the employment picture has hit a tipping point of momentum that will increase in 2015. There is another tipping point that is upon us as well; that is wage growth.

Throughout the job growth cycle of the past few years, wages have remained stuck behind the rate of inflation. This stagnation has a limiting effect on the spending and saving that consumers do. Since consumer spending has picked up to pre-recessionary levels, I’m left to conclude that savings has not followed, which is not a good thing.

As employment growth pushes unemployment towards the 5.5% threshold, a likely prospect in early 2015, demand for new workers will put irresistible pressure upward on wages. We are seeing this in construction already and the market needs to adjust its expectations. By market I mean owners of projects.

Competitive pressures have kept construction prices aggressive since 2009. Owners are beginning to see higher prices now, depending on what contractors they have asked for numbers. This is especially true in the specialty contractor segment. Construction projects are justified by a pro forma projection of return on investment that starts with the cost of the building at occupancy. Land prices have risen. Site costs have gone up more than inflation. Building costs are going to have to follow within the next 6-12 months. That means owners will have to adjust rents, the horizon for return on investment or the rate of return. If your pro forma is built upon 2013 or even 2014 prices, you may want to revisit it, or build sooner.

Rising wages are on balance a good thing. More workers making more money improves the business climate and the rationale behind the construction project in the first place. But there will probably be a balancing period while owners, contractors and occupants adjust their expectations. You can wish the market were not moving higher but markets dictate rather than follow.