Steady job gains in US setting stage for the Fed to raise rates
Trade war will bring only ‘pain’, China says
AWAVE of hiring in February – US President Donald Trump’s first full month in office – pointed to a strong foundation for the nation’s economy, providing further evidence for the Federal Reserve that the moment to raise interest rates has come.
The US Labor Department reported a gain of 235,000 jobs and healthy wage growth in a month when even the weather cooperated. It was the last major data release before Fed policymakers meet Tuesday and Wednesday, when they have signalled their intent to increase the benchmark interest rate.
“The economy is riding a wave of bullish sentiment postelection,” said Andrew Chamberlain, chief economist at Glassdoor, a career website. “We’re seeing strong labour demand across the board and no sign of slowing right now.”
Republicans and Democrats quickly jostled for credit.
Sean Spicer, the White House press secretary, said Trump had “jumpstarted job creation, not only through his executive action but because of the surge in economic confidence and optimism that has been inspired since his election”.
Trump, who, as a candidate, repeatedly dismissed the official jobs reports as phony, reposted a comment on Twitter from the conservative website Drudge Report that said, “GREAT AGAIN: +235,000.” Spicer later quoted Trump on his faith in the report, “They may have been phony in the past, but it’s very real now.”
The Labor Department repeated that it had not changed the way it collected and analysed jobs data since Trump took office. “It’s business as usual,” said Megan Kindelan, director of public affairs at the Bureau of Labor Statistics.
Republican self-congratulation clearly irked Democrats. Tom Perez, labour secretary in the Obama administration and now chairman of the Democratic National Committee, countered that Trump had “absolutely nothing” to do with the job gains. “Trump inherited an economy from Barack Obama with the longest streak of private sector job growth in history,” he said.
Although the economic anxiety that helped put Trump in the White House remains, the official jobless rate is near what the Fed considers full employment – a threshold where, in theory at least, everyone who wants a job at the going rate can find one. The official jobless rate fell to 4.7 percent, from 4.8 percent in January, even as the overall labour force grew.
At the same time, jobless claims are near a 44-year low, and the stock market is surging. Revisions to previous estimates raised the three-month average of monthly job gains to 209,000 and annual wage growth to 2.8 percent, further bolstering the case for those who argue the economy is strong enough to withstand a rate increase.
Bigger paychecks are something that most Americans are particularly eager to see, after years of stagnant wage growth. The Fed, too, has been waiting for an increase, but it is also wary of wages rising too fast. Its members want to head off incipient inflation without putting the brakes on hiring, especially because the benefits of the 8-year-old recovery have been so unevenly distributed. Balancing those two goals is tricky. Lauren Griffin, senior vice president at Adecco Staffing USA, said the scarcity of qualified workers had compelled employers to raise wages, strengthen benefits and improve amenities at the office. “We’ve got people in orientation classes,” Griffin said, “and they get up and leave because they’re contacted about another job that might be more money.”
At the same time, a broader measure of unemployment – which includes the millions of Americans who have given up looking for work or who are working part time but would prefer fulltime jobs – dropped to 9.2 percent last month but is still high given how tight the labor market looks otherwise.
Cautioning the Fed against moving too quickly with a rate increase, Elise Gould, an economist at the left-leaning Economic Policy Institute, noted that, “Workers throughout the economy, including young workers, workers of color, and low-wage workers, need a chance to make up lost ground on wage growth.”
Many Americans who live outside urban centres also have been excluded from most of the rewards of the economic recovery.
Large metropolitan counties have had more than twice the annual wage growth of nonmetropolitan areas, according to the latest figures from the Bureau of Labor Statistics.
“Higher-wage jobs might be following educated, young workers, who are increasingly living in dense, urban neighbourhoods as other demographic groups move to the suburbs,” said Jed Kolko, chief economist at Indeed, a job search site. “Broader economic shifts also favor big cities: The occupations projected to grow tend to be more urban, while shrinking sectors like manufacturing and farming tend to be located outside large metros.”
That is disappointing for people with long-standing ties to smaller, more rural communities. “A lot of this has to do with mobility,” said Steven W Rick, chief economist at CUNA Mutual Group, an insurance company. “People are going to have to move where the jobs are and not expect the jobs to come where they are.” CHINA on Saturday warned the United States against launching a trade war, saying that both countries would suffer if US President Donald Trump follows through on his threats.
The billionaire politician has repeatedly accused China of using unfair trade policies to steal jobs from the US, threatening to retaliate with massive tariffs unless Beijing changes tack.
“A trade war is not in the interest of the two countries and the two peoples,” China’s Minister of Commerce Zhong Shan told reporters on the sidelines of the country’s annual political gathering in Beijing.
“It’s fair to say trade war will only cause pain without gains.”
He said that US exports to China have increased by an average of about 11 percent per year over the last decade, while Chinese exports have only increased by 6.6 percent over the same p e r i o d , n o t i n g that the Asiangiant is also a m a j o r importer of American goods like soyb e a n s , cars and Boeing airplanes.
“This clearly shows that China and America are very important to each other,” he added.
On Thursday, Zhong’s American counterpart Wilbur Ross said that the trade conflict with China and other countries has already been on for decades, but the US is just now beginning to fight back.
China is the world’s biggest trader in goods. It accounts for about $350 billion of the US trade deficit, about half the total.
The warning was the second time this week that China has railed against a possible trade war, amid growing indications that the Trump administration is serious about pursuing a protectionist agenda.
Last week the United States Trade Representative sent a letter to Congress saying that Americans are not directly subject to rulings by the World Trade Organization, which Washington joined when it was founded in 1995.
The assertion provoked a warning from China’s commerce ministry that attempts to ignore the organisation’s rules could lead to “a repetition of the trade war of the 1930s”.