Daily Management Review

While Wages Continue To Lag, U.S. Job Growth Accelerates In June


07/07/2017




While Wages Continue To Lag, U.S. Job Growth Accelerates In June
In signs of labor market strength that could keep the Federal Reserve on course for a third interest rate increase this year despite benign inflation, U.S. job growth surged more than expected in June and employers increased hours for workers.
 
Beating economists' expectations for a 179,000 gain, the Labor Department said on Friday that non-farm payrolls jumped by 222,000 jobs last month. 47,000 more jobs created than previously reported in April and May after revision of data.
 
In a sign of confidence in the labor market, more people were looking for work which helped the unemployment rate to rise to 4.4 percent from a 16-year low of 4.3 percent. The jobless rate is near the most recent Fed median forecast for 2017 and has dropped four-tenths of a percentage point this year.
 
In May, from 34.4 hours, the average workweek increased to 34.5 hours. Reduction of its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September could be prompted to be started by the U.S. central bank by labor market buoyancy.

For the second time this year, the Fed raised its benchmark overnight interest rate in June. But economists expect another rate hike only in December with inflation retreating further below the central bank's 2 percent target in May.
 
And reinforcing views that the economy regained speed in the second quarter after a sluggish performance at the start of the year, June's employment gains exceeded the 186,000 monthly average for 2016.
 
But as the labor market hits full employment, the pace of job growth is expected to slow. Anecdotal evidence of companies struggling to find qualified workers is growing.
 
As a result, in an effort to attract and retain their employees, companies are gradually raising wages. Wage growth, which has remained stubbornly sluggish despite the tightening labor market, is expected to be boosted by worker shortages, say economists.
 
After gaining 0.1 percent in May, average hourly earnings increased four cents or 0.2 percent in June. Abd from 2.4 percent in May, that lifted the year-on-year increase in wages to 2.5 percent.
 
Pledge to sharply boost economic growth and further strengthen the labor market by slashing taxes and cutting regulation has been made by Republican President Donald Trump, who inherited a strong job market from the Obama administration.
 
But there are worries that political scandals could derail the Trump administration's economic agenda and Republicans have struggled with healthcare legislation.
 
In order to keep up with growth in the working-age population, the economy needs to create 75,000 to 100,000 jobs per month.
 
But there is still some labor market slack. There was a rise of 8.6 percent last month from 8.4 percent in May, which was the lowest since November 2007, in a broad 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.
 
There was a rise of one-tenth of a percentage point to 62.8 percent for the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job.
 
With manufacturing payrolls increasing 1,000 after factories shed 2,000 jobs in May, employment gains were broad in June. But as slowing sales and bloated inventories force manufacturers to cut back on production, the automobile sector lost a further 1,300 jobs.
 
(Source:www.reuters.com)






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