Slowdown in US new jobs may work against Fed rate rise
Data shows 151,000 workers added to payrolls of US companies in August
Average hourly earnings grew 0.1 per cent in August, bringing the 12-month increase in wages to 2.4 per cent. Photograph: David Jones/PA Wire
Hiring in the United States eased in August, with the government reporting on Friday that employers had expanded their payrolls by 151,000 workers.
The temperate performance is expected to bolster those within the Federal Reserve who favour a wait-and-see approach towards raising the benchmark interest rate when the central bank meets later this month.
The official unemployment rate, based on a separate survey of households, remained at 4.9 per cent. Average hourly earnings grew only 0.1 per cent, bringing the 12-month increase in wages to 2.4 per cent, modest though still ahead of inflation.
Revisions to the job gains previously reported for June and July found 1,000 fewer positions. Over the last three months, job gains have averaged 232,000 a month, with 271,000 in June and 275,000 in July.
This report reflects only a single month of the labour market’s performance, but it offers the last major piece of economic news before the central bank’s scheduled gathering on September 20th and 21st.
“This morning’s report is good but probably not good enough,” to persuade the Fed to raise interest rates in September, said Carl Tannenbaum, chief economist at Northern Trust. “It confirms that the economy is performing well, but does not provide the threat of overheating that might have caused an interest-rate increase sooner rather than later.”
How to handle a recovery that has delivered what Ken Esch, a partner at PricewaterhouseCoopers, described as “less than spectacular growth” has been a top issue between the candidates.
As for hiring, Mr Esch said: “The headcount increases are below what we’d like to see or expect to see coming out of a recession.”
Since the financial crisis, Fed policymakers have raised the interest rate range just once, last December, from its near-zero level. Betting that low rates encourage businesses to borrow and invest, Fed policymakers are now split between those who worry that reducing the economic stimulus by lifting rates would derail a fragile economy and those who fear that waiting could allow inflation to take hold.
The jobless rate has been halved in the last seven years and consumer spending remains strong, but wages have only recently begun a slow climb.
In 2016, monthly job gains flip-flopped, plummeting to 24,000 in May and swelling to more than 10 times that number in June.
Average monthly totals so far this year have fallen below the rate in the previous two years. But economists say that it is natural for the jobs machine to slow as the unemployment rate shrinks. Other note that the number of new entrants into the labour force is also slowing.
Still, record numbers of workers remain out of the labour market altogether, widening the gap between the haves and the have-nots and depressing wage growth.
“A lot of people are still on the bench that could come into the labour market,” Mr Esch said before the jobs report was released on Friday. “Until more people are participating, I don’t see the inflationary pressures, and our data says we don’t expect to see much over the next 12 months.”
Focusing on average growth in hourly earnings across the entire nation masks wide variations. Andrew Chamberlain, chief economist at Glassdoor Economic Research, characterised the report on Friday as “moderate to positive”.
“The same industries that have been doing well for the past year continue to do well while the same industries that have been losing continue to lose,” he said. – (Copyright New York Times 2016)