WASHINGTON: US job growth accelerated in August and wages notched their largest annual increase in more than nine years, the clearest signs that the economy was so far weathering the Trump administration’s escalating trade war with China. The Labor Department’s closely watched employment report published on Friday also showed slack in the jobs market was rapidly diminishing, with a broader measure of unemployment falling to a level not seen since 2001. The report cemented expectations for a third interest rate increase from the Federal Reserve this year when policymakers meet on September 25-26.
Analysts say the administration’s $1.5 trillion tax cut package and increased government spending were shielding the economy from the trade tensions, which have also seen Washington engaged in tit-for-tat tariffs with other trade partners, including the European Union, Canada and Mexico.
“With the tax cuts and spending increases creating a sugar high, there is little reason to expect labour demand to moderate over the rest of this year or even in the first half of next,” said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania.
Nonfarm payrolls surged by 201,000 jobs last month, boosted by hiring at construction sites, wholesalers and professional and business services, the Labor Department said. There were also gains in transportation and healthcare employment.
Average hourly earnings increased 0.4 per cent, or 10 cents in August after rising 0.3 per cent in July. That raised the annual increase in wages to 2.9 per cent in August, the largest gain since June 2009, from 2.7 per cent in July.
Wage growth has been the labor market’s Achilles heel and last month’s increase fit in with economists’ expectations that inflation will continue to bounce around the Fed’s 2 per cent target for the remainder of this year and into early 2019.
“Even if we were to see a reversal of some of the monthly wage gains, short of a collapse, current levels support the Fed’s symmetric 2 per cent inflation target,” said Marvin Loh, senior global market strategist at BNY Mellon in Boston. “The market fully expects another hike in September.”
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, fell one-tenth of a percentage point to 7.4 per cent in August, the lowest level since April 2001. The unemployment rate was unchanged at 3.9 per cent. Economists polled by Reuters had forecast nonfarm payrolls increasing by 191,000 jobs last month and the unemployment rate falling to 3.8 per cent. The economy created 50,000 fewer jobs in June and July than previously reported.
Job growth averaged 185,000 per month in the past three months. The economy needs to create 120,000 jobs per month to keep up with growth in the working-age population.
The dollar rallied against a basket of currencies on the report, while US Treasury yields rose. Stocks on Wall Street were trading lower.
The employment report added to manufacturing and services industries surveys in suggesting the Trump administration’s protectionist trade policy was having a marginal impact on the economy for now. The economy grew at a 4.2-per cent annualised rate in the second quarter, almost double the 2.2 per cent pace set in the January-March period.
Economists said the import duties implemented so far have affected only a small portion of the American economy, but warned this could change if President Donald Trump pressed ahead with additional tariffs on Chinese imports. The United States and China have slapped retaliatory tariffs on a combined $100 billion of products since early July. — Reuters
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