US & CANADA: BUSINESS > Employment US job growth slows

Candidates talk with recruiters during a job fair at the Amazon fulfillment centre in Robbinsville Township, New Jersey. (AP Photo)

WASHINGTON: Job growth in the United States slowed more than expected in December amid a decline in retail employment, but a pickup in monthly wage gains pointed to labour market strength that could pave the way for the Federal Reserve to increase interest rates in March.

Nonfarm payrolls increased by 148,000 positions last month, the Labor Department said on Friday. Retail payrolls fell by 20,300 in December, the largest drop since March, despite a strong holiday shopping season.

Job growth had surged in October and November after being held back in September by back-to-back hurricanes, which destroyed infrastructure and homes and temporarily displaced some workers in heavily populated Texas and Florida.

Average hourly earnings rose 9 cents, or 0.3%, in December after gaining 0.1% in the prior month. That lifted the annual increase in wages to 2.5% from 2.4% in November. The unemployment rate was unchanged at a 17-year low of 4.1%.

Job growth is slowing as the labour market nears full employment. It could get a boost from a $1.5-trillion package of tax cuts passed by the Republican-controlled US Congress and signed into law by President Donald Trump last month.

But the lift from the fiscal stimulus, which includes a sharp reduction in the corporate income tax rate to 21% from 35%, is likely to be modest as the stimulus is occurring with the economy operating almost at capacity. There are even concerns the economy could overheat.

“With the tax cuts we get solid GDP growth in the near-term and then a fiscal hangover, which will likely put the economy at a greater risk of recession,” said Ryan Sweet, senior economist at Moody’s Analytics.

For all of 2017, the US economy created 2.1 million jobs, below the 2.2 million added in 2016. Economists expect job growth to slow this year as the labour market hits full employment, which will likely spur wage growth as employers compete for workers.

The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population. Economists are optimistic that annual wage growth will top 3.0% by the end of this year. The December employment report incorporated annual revisions to the seasonally adjusted household survey data going back five years.

There was no change in the unemployment rate, which declined by seven-tenths of a percentage point last year.

Economists believe the jobless rate could drop to 3.5% by the end of this year. That could potentially unleash a faster pace of wage growth and translate into a much stronger increase in inflation than currently anticipated.

That, according to economists, would force the Fed to push through four interest rate increases this year instead of the three it has penciled in. The US central bank raised borrowing costs three times in 2017.

“If the unemployment rate declines and wages rise faster, which is likely, the Fed is going to start worrying about wage inflation,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

Employment gains were broad in December, mirroring the pattern of the previous two months.

Construction payrolls increased by 30,000 jobs in December, the most since February, reflecting recent strong increases in homebuilding. Manufacturing employment increased by 25,000 jobs.

Department store payrolls fell by 8,200 in December and employment at clothing stores dropped by 3,800.


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The Bangkok Post
5 Jan 2018 at 20:49

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