Advertisement
Advertisement
United States
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
A jobseeker, standing, talks with a Target human resources representative at a Target store in Chicago. US jobs growth sped up in October, but wage gains stalled. Photo: AP

US jobs number race higher but wage gains stall as people drop out of work force

US job growth accelerated in October after hurricane-related disruptions in the prior month, but a sharp retreat in annual wage gains and surge in the number of people dropping out of the work force cast a cloud over the labour market.

Non-farm payrolls increased by 261,000 jobs last month as 106,000 leisure and hospitality workers returned to work, the Labour Department said in its closely watched employment report on Friday. That was the largest gain since July 2016 but below economists’ expectations for an increase 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. Some aspects of the report, however, were downbeat.

Average hourly earnings slipped by one cent, leaving them unchanged in percentage terms, in part because of the return of the lower-paid industry workers. That lowered the year-on-year increase to 2.4 per cent, which was the smallest since February 2016. Wages shot up 0.5 per cent in September, lifting the annual increase in that month to 2.9 per cent.

A for sale sign in front of a new home in Miami, Florida. US sales of new single-family homes spiked in September, hitting their highest level in a decade. Photo: Getty Images/Agence France-Presse

Still, October’s job growth acceleration reinforced the Federal Reserve’s assessment on Wednesday that “the labour market has continued to strengthen,” and probably does little to change expectations it will raise interest rates in December. The US central bank has lifted 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. “Overall, sustained job growth and labour market slack at pre-crisis lows keeps December in play.”

Although the unemployment rate fell to near a 17-year low of 4.1 per cent, it was because the labour force dropped by 765,000 after a surprise jump 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 four-tenths 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.

Economists, however, remain optimistic that wage growth will accelerate with the labour market near full employment. Last month’s one-tenth percentage point drop in the unemployment rate took it to its lowest reading since December 2000. The jobless rate is now 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 employment, dropped to 7.9 per cent last month, the lowest level since December 2006, from 8.3 per cent in September.

Tepid wage growth supports the view that inflation will continue to undershoot the Fed’s 2 per cent target and could raise concerns about consumer spending, which appears to have been largely supported by savings this year.

The economy grew at a 3.0 per cent annualised rate in the third quarter. Growth has remained strong even as President Donald Trump and the Republican-led Congress have struggled to enact their economic programme.

A separate report from the Commerce Department on Friday showed the US trade deficit increased 1.7 per cent to US$43.5 billion in September as rising exports were offset by a surge in imports. Exports, which were the highest since December 2014, are being buoyed by a weakening dollar and strong global growth.

The all-new 2018 Ford Expedition SUV goes through the assembly line at the Ford Kentucky Truck Plant in Louisville, Kentucky. US job growth sped up but wage gains stalled. Photo: Getty Images/Agence France-Presse

Monthly job growth has averaged 162,000 over the past three months. The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

The slowing job growth trend largely reflects employers’ difficulties in finding qualified workers. Some economists believe the impact of the hurricanes was still holding back employment growth.

Private payrolls surged by 219,000 jobs in October after falling by 3,000 in September. Manufacturing employment increased by 24,000 jobs. The retail sector lost 8,300 jobs last month.

Construction payrolls gained 11,000 in October, likely boosted by hiring related to the clean-up and rebuilding efforts in the wake of the hurricanes. There were increases in professional and business services payrolls.

Post