Job creation points to steady growth in US
THE US labour market slowed precipitously in August but continued a sixyear streak of monthly job creation, according to figures released last week by the Labour Department.
The economy added 151,000 new positions for the month, a sharp drop from July’s revised total of 275,000 new non-farm positions and also well below analyst expectations.
Leading up to the September 2 disclosure, markets had been intently awaiting the new numbers as a signal of looming interest rate hikes by the Federal Reserve.
However, it was not immediately clear how August’s employment results were likely to influence the Fed’s thinking.
Analysts disagreed as to whether the jobs numbers presaged a rate hike as soon as this month.
As August’s added jobs were easily absorbed by the growth in the size of the labour force, the results appeared to tread water.
The unemployment rate remained steady at 4.9 percent for the third month in a row. The number of longterm unemployed was also unchanged at 2 million people.
Nariman Behravesh, chief economist at IHS Markit, said the figures implied that unemployment was likely to remain at that level in the near-term, pointing to a “a steady, if unexciting, cruise speed” for economic growth of 2 - 2.5pc.
The International Monetary Fund has said it expected to downgrade its US economic forecast for 2016 next month.
As for the Fed’s actions when it reviews monetary policy in this third week of September, the outcome appeared to be a toss up.
“Most members will view this report as consistent with solid economic activity and will believe that activity will continue to pull inflation upward toward their target,” Rob Martin and Michael Gapen of Barclays said in a research note, which predicted a September rate increase.
Joel Naroff of Naroff Economic Advisors disagreed: “If Janet Yellen and her merry band of terrified rate hikers wanted a strong jobs report to give them cover to raise rates in September, they didn’t get it,” he wrote in a note to clients.
The mining sector, dominated by the oil industry, continued to shed jobs since reaching a peak in 2014, losing 4000 more positions in the month.
Employment levels in industries such as construction, manufacturing, retail and transportation were flat.
However, other sectors continued to trend higher, with gains in health care, which added 14,000 more jobs, food and services, which added 34,000 positions, and the financial sector, which rose by 15,000, the Labor Department said.
Average hourly earnings rose a meager 3 cents to US$25.73, putting them up 2.4pc for the year.
The University of Michigan economist Justin Wolfers said the figures showed the US economy continued on a healthy upward path but that there were scant signs of inflationary pressures.
“It’s now a sure thing that the economy will be moving forward – looking healthy and showing at least some momentum – come Election Day,” he said. –