US employment growth picks up

The non-farm payrolls increased by 261,000 last month as 106,000 leisure and hospitality workers returned to work.

WASHINGTON: US job growth accelerated in October after hurricane-related disruptions in the prior month, but wages grew at their slowest annual pace in more than one-and-a-half years in a sign that inflation probably will remain benign.

Non-farm payrolls increased by 261,000 last month as 106,000 leisure and hospitality workers returned to work, the Labor Department said in its closely watched employment report on Friday. That was the largest gain since July 2016 but below economists’ expectations for a jump of 310,000 jobs. Data for September was revised to show a gain of 18,000 jobs instead of a decline of 33,000 as previously reported.

Tax reforms

The White House, which is pushing a Republican-backed package of tax cuts to boost economic growth and employment, trumpeted the payrolls gains. “Jobs, Jobs, Jobs!” President Donald Trump tweeted after the release of the report.

But Nancy Pelosi, the Democratic leader in the US House of Representatives, said in a statement that the report showed Americans were continuing to be denied bigger paychecks by Republicans’ “billionaires-first agenda.”

Average hourly earnings slipped one cent in October, leaving them unchanged in percentage terms, in part due to the return of the lower-paid leisure and hospitality workers. Wages shot up 0.5 per cent in September. They were up 2.4 per cent on a year-on-year basis last month, the smallest gain since February 2016, after a 2.8 per cent advance in the prior month.

October’s job growth acceleration reinforced the Federal Reserve’s assessment on Wednesday that “the labour market has continued to strengthen,” and the sluggish wage data did little to change expectations it will raise interest rates in December. The US central bank has increased rates twice this year.

“The weakness in wages will not go unnoticed at the Fed, particularly for members that remained more concerned over the inflation outlook,” said Michael Hanson, chief US economist at TD Securities in New York. “Overall, sustained job growth and labor market slack at pre-crisis lows keeps December in play.”

Tepid wage growth supports the view that inflation will continue to undershoot the Fed’s 2 per cent target. Should wage growth remain sluggish, economists say it would be hard for central bank policymakers to hike rates three times next year as they currently anticipate.

Although the unemployment rate fell to near a 17-year low of 4.1 per cent in October, from 4.2 per cent in the prior month, it was because the labor force dropped by 765,000 after a surprise rise of 575,000 in September.

The labour force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell fourtenths of a percentage point to 62.7 per cent.

The sharp moderation in job growth in September was blamed on Hurricanes Harvey and Irma, which devastated parts of Texas and Florida in late August and early September and left workers, mostly in lower-paying industries such as leisure and hospitality, temporarily unemployed.

Prices of longer-dated US Treasuries were trading higher as were US stocks. The dollar gained against a basket of currencies.

Labour market tightening

Economists, however, remain optimistic that wage growth will accelerate with the labor market near full employment. The unemployment rate, which has declined by 0.7 percentage point since January, is now at its lowest level since December 2000 and below the Fed’s median forecast for 2017.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time job, dropped to 7.9 per cent last month. That was the lowest level since December 2006 and was down from 8.3 per cent in September. -