Solid US jobs growth doesn’t as­sure rate hike from the Fed

The Myanmar Times - - International Business -

THE US Septem­ber em­ploy­ment num­bers re­leased last week con­firmed that US labour mar­kets re­main healthy, with wages ris­ing and new en­trants join­ing the job hunt.

But com­ing in short of ex­pec­ta­tions, an­a­lysts said the data was not enough to firmly con­vince the Fed­eral Re­serve to fi­nally raise in­ter­est rates in De­cem­ber.

Closely watched Labour Depart­ment fig­ures showed the US econ­omy added 156,000 jobs in Septem­ber, slower than the av­er­age of 210,000 in the two pre­vi­ous months.

As job seek­ers re­turned from the side­lines, the un­em­ploy­ment rate nudged up­wards one tenth of a point to 5 per­cent, with 7.9 mil­lion peo­ple counted as un­em­ployed.

The White House touted the re­sults as a boon for the work­ing per­son’s bot­tom line, not­ing that so far in 2016, hourly wages in the pri­vate sec­tor had risen at an an­nu­alised rate of 2.8pc.

“In fact, real wages have grown faster over the cur­rent busi­ness cy­cle than in any since the early 1970s,” Ja­son Fur­man, chair of the White House coun­sel of eco­nomic ad­vis­ers, said in a state­ment.

Over the month, the av­er­age work­week grew by 0.1 hours to 34.4 hours. Av­er­age hourly earn­ings rose six cents to US$25.79.

But for Fed pol­i­cy­mak­ers, the ques­tion of whether the US is at or near full em­ploy­ment – a point at which econ­o­mists believe in­fla­tion should rise and in­ter­est rates should be pushed up – will likely per­sist.

A rise in wages could sug­gest em­ploy­ers are hav­ing trou­ble find­ing qual­i­fied re­cruits and thus that jobs mar­kets are tight­en­ing.

But mem­bers of the Fed­eral Open Mar­ket Com­mit­tee who op­pose im­me­di­ate in­ter­est rate raises ar­gue that labour mar­kets still re­main “slack”, not­ing that suc­ces­sive months of jobs gains have failed to pro­duce de­ci­sive de­creases in the un­em­ploy­ment rate or un­am­bigu­ous signs of in­fla­tion­ary pres­sure.

The rise in the job­less rate, de­spite more jobs cre­ated, sug­gested slack re­mains.

Tim Duy, senior di­rec­tor of the Oregon Eco­nomic Fo­rum, said the so-called Fed “hawks”, or those who favour rais­ing rates now, had an in­creas­ingly dif­fi­cult case to make.

“I would say one more re­port like this and the hawks will have an­other fight on their hands in De­cem­ber,” he posted on Twit­ter.

Sup­port­ing the ar­gu­ment of a tighter mar­ket, the labour force par­tic­i­pa­tion rose 0.1 per­cent­age points to 62.9pc last month, com­pared to 62.4pc a year ago.

US in­ter­est rates have re­mained at his­toric lows, even after the Fed raised short-term rates in De­cem­ber for the first time in nearly a decade to their tar­get range of 0.25 to 0.5pc.

After an­nounc­ing a course of rate hikes for 2016, pol­i­cy­mak­ers at the Fed have in­stead let them stand pat, cit­ing un­cer­tainty abroad and signs of weak­ness in the US.

Fed chair Janet Yellen pre­dicted last month a rate hike by year-end if hir­ing con­tin­ued to im­prove and no other ma­jor risks de­vel­oped.

The Fed is due to meet next just days be­fore the Novem­ber 8 US elec­tions, leav­ing ob­servers to claim any rate in­crease can only come at the fi­nal meet­ing of the year in De­cem­ber.

Michael Gapen and Rob Martin of Bar­clays said the trend in­di­cated a move by the Fed even­tu­ally.

“It is not clear to us that the labour mar­ket mo­men­tum is fully con­sis­tent with a De­cem­ber rate hike,” they wrote in a re­search note.

“None­the­less, most [Fed] mem­bers will likely take com­fort from the un­der­ly­ing de­tails of the re­port along with the rel­a­tive strength in wage growth,” they said. –

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