Friday, 14 December, 2018

Wall Street rebounds after federal jobs report shows continued wage stagnation

A worker stacks packaged Beautyrest bed frames at the Hollywood Bed Frame Company factory in Commerce California seven miles southeast from downtown Los Angeles Hispanic Unemployment Rate Sinks to All Time Low in June ROBYN BECK AFP Getty Images 6 Jul 2018
Priscilla Morrison | 08 July, 2018, 18:41

The report showed little, if any, evidence of tariff-related weakness in the economy, especially with continued strength in goods-producing jobs: Manufacturing added 36,000 to payrolls, the best month since December, including a 12,000 increase in the auto industry, the most since August.

Service providers boosted payrolls by 149,000, led by a 54,000 gain in education and health services, and 50,000 in professional and business services.

"Healthy" rise in the unemployment rate: Even though it was expected to decline, the unemployment rate rose to 4 percent from 3.8 percent.

Wage growth remained sluggish, however, and was effectively erased by inflation: average hourly earnings rose just 0.2 percent to $26.98, putting wages up 2.7 percent over the same month past year, the same as the 2.7 percent rise in the Consumer Price Index.

"Despite ongoing concerns about being on the brink of a trade war, today's jobs report shows the continued strength of the economic recovery in the USA", said Tony Bedikian, head of global markets at Citizens Bank.

The figures for the previous two months were also revised higher.

America's labour market boomed again last month, strengthening the case for the Federal Reserve to raise interest rates twice more this year. The majority of the increase is in support activities for mining.

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"There's definitely still a lot of room for the labour market to absorb the slack", Kevin Hassett, chairman of the White House Council of Economic Advisers, said on Bloomberg Television.

At the same time, the unemployment rate rose to 4 per cent from 3.8 per cent, the government said Friday, as more people began looking for a job and not all of them found one. That trend is likely to continue through 2018, with some economists predicting the jobless rate will keep falling to 3.5 percent by year end.

The moderate wage growth should allay fears of a strong build-up in inflation pressures.

Nonetheless, the U.S. jobs market is incredibly hot right now with yesterday's NFIB jobs survey suggesting that in the small business sector, the proportion of firms looking to hire workers has been higher on only three occasions in the past 45 years.

For Catherine Barrera, who works as the Chief Economist for online job site ZipRecruiter, reportedly said the labor force numbers quelled her concern about the unemployment figure. Fed officials last month boosted the number of interest-rate hikes they expect in 2018 to four from three. The department does not count people in the unemployment total unless they are actively seeking work. Trump has spoken about slapping tariffs on imported cars, trucks and auto parts, which General Motors has warned could hurt the USA auto industry and drive up vehicle prices.

On Friday, the world witnessed the imposition of new tariffs by the USA and China on goods worth $34bn from each of the two countries.

In the past three months, the United States has increased 211,000 jobs monthly on average. Economists say the effects could include companies curtailing both hiring and investment, which would have a cooling effect on the jobs figures in coming months. But for now the sector, which accounts for about 12 percent of the USA economy, appears in good health.

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