US job growth accelerates in January, but wages lag
Unemployment rate rises to 4.8%
WASHINGTON:
US job growth surged more than expected in January as construction firms and retailers ramped up hiring, which likely gives the Trump administration a head start as it seeks to boost the economy and employment. Nonfarm payrolls increased by 227,000 jobs last month, the largest gain in four months, the Labor Department said yesterday. But the unemployment rate rose one-tenth of a percentage point to 4.8 percent and wages rose only by three cents, suggesting that there was still some slack in the labor market.
Revisions to November and December showed the economy created 39,000 fewer jobs than previously reported. Still, the labor market continues to tighten, which could soon spur a faster pace of wage growth. Federal Reserve officials view the labor market as being at or near full employment. Prices for US government bonds rose as traders focused on the disappointing wage growth, which was seen keeping the Fed on a gradual path of interest rate increases. The dollar was little changed against a basket of currencies. US stocks were trading higher. Economists polled by Reuters had forecast payrolls rising 175,000 last month and the unemployment rate unchanged at 4.7 percent.
“While there’s a great deal of anticipation surrounding steps that President Trump and the GOP-led Congress are expected to take to boost the economy, that’s going to take more time,” said Mark Hamrick a senior economic analyst at Bankrate.com in Washington. President Donald Trump vowed during last year’s election campaign to deliver 4 percent annual gross domestic product growth, largely on the back of a plan to cut taxes, reduce regulations, increase infrastructure spending and renegotiate trade deals in the United States’ favor.
Although details on the policy proposals remain sketchy, consumer and business confidence have surged in the wake of Trump’s election victory last November.
But with the economy near full employment, some economists are skeptical of the 4 percent growth pledge. Annual GDP growth has not exceeded 2.6 percent since the 2007-08 recession.
Disappointing Wage Growth
Average hourly earnings edged up 0.1 percent last month, well below expectations for a 0.3 percent rise. December’s wage gain was revised down to 0.2 percent from the previously reported 0.4 percent increase. January’s marginal rise in average hourly earnings is a surprise given that minimum wage increases took effect in at least 19 states last month. The small gain lowered the year-on-year increase in earnings to 2.5 percent from 2.8 percent in December.
Sluggish wage growth, if it persists, would suggest little urgency from the Fed to tighten monetary policy. The pace of rate hikes will, however, probably depend on how much inflation is generated from Trump’s proposed measures to boost economic growth. The US central bank, which raised rates in December, has forecast three rate increases this year.
“The inability of wage gains to gain any solid momentum remains one of the perplexing labor market characteristics in this expansion and the key factor for the Fed’s stated willingness to proceed at a very gradual pace in its planned rate normalization process ahead,” said Anthony Karydakis, chief economic strategist at Miller Tabak in New York. On Wednesday, the Fed kept its benchmark overnight interest rate unchanged in a range of 0.50 percent to 0.75 percent. It said it expected labor market conditions would strengthen “somewhat further”. With its January employment report, the government published its annual “benchmark” revisions and updated the formulas it uses to smooth the data for regular seasonal fluctuations. It also incorporated new population estimates. The government said the level of employment in March of last year was 60,000 lower than it had reported. As the labor market nears full employment, the pool of workers is shrinking, which is slowing job growth.
The shift in population controls mean figures on the labor force or number of employed or unemployed in January are not directly comparable with December. The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, was at 62.9 percent in January, the highest level since September. The employment-to-population ratio was at 59.9 percent last month, the highest level since March 2016. A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment rose two-tenths of a percentage point to 9.4 percent last month. — Reuters