Friday, 20 July, 2018

Booming US jobs market lifts chance of rate rise

The report showed little if any evidence of tariff-related weakness in the economy especially with continued strength in goods-producing jobs. — Reuters pic Employment gains, job hunter influx clears way for rate hike: experts
Jean Garcia | 08 July, 2018, 18:41

Mining employment continues to trend upward as the US adds thousands of jobs in June.

The Labor Department has said that apart from the additional 213,000 jobs in June, another 37,000 extra jobs were created in April and May, which was again more than the estimates.

The department's data shows 601,000 new people chose to actively look for a job in June, after not seeking a job previously.

Jim O'Sullivan, chief USA economist at High Frequency Economics, said gains have averaged 215,000 month so far this year, up from 182,000 "more than strong enough to keep the unemployment rate trending down over time".

The big news from the Labor Department's employment report Friday is that 601,000 Americans re-entered the workforce in June. And the unemployment rate remains at its lowest in more than 18 years.

The job growth shows the labour market shrugging off worries about a slowdown triggered by trade fights or rising borrowing costs.

The U.S. economy surpassed expectations in June, adding more jobs than expected even as the unemployment rate rose slightly to 4 percent.

Economists polled by Reuters had forecast nonfarm payrolls increasing by 195,000 jobs last month and the unemployment rate steady at 3.8 percent.

Savings from the tax cuts enabled companies in the Standard & Poor's 500 stock index to buy back a record number of shares in the first three months of 2018.

But average, hourly earnings increased in both May and June, according to BLS numbers. That relatively modest increase means that, after adjusting for inflation, overall wages remain almost flat. This means that workers' wages will likely fall behind the rate of inflation, which in May reached 2.8 percent.

"Wages could rise at a faster pace in the future as the economy is humming and the labor market is tight", said Sung Won Sohn, chief economist at SS Economics in Los Angeles.

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Unlike the Sacramento and Utah leagues, there's a true playoff system in Las Vegas and a champion will be crowned on July 17. Each team will play at least five games, while those advancing could compete in as many as eight contests.

The bottom line is that the buoyancy in June's US labor market statistics will reaffirm the Federal Reserve's view that the economy is doing super-well at present and that further interest rate hikes will be justified.

The dollar fell to a three-week low against a basket of currencies on the employment report. The figure for aircraft imports more than tripled to $937 million due to the purchase of several air liners from the U.S.

Altogether, 285,000 new jobs have been added in the manufacturing sector in the past year.

Remaining slack in the job market could be keeping a lid on wage growth, said Cathy Barerra, chief economist at ZipRecruiter.

The U-6 or underemployment rate rose to 7.8 percent from 7.6 percent; the gauge includes part-time workers who'd prefer a full-time position and people who want a job but aren't actively looking.

Payroll growth in May was revised up to 244,000 from 223,000 in yesterday's report.

Gross domestic product estimates for the April-June period are above a 4 percent annualized rate, double the 2.0 percent pace logged in the first quarter.

The economy continues to show many signs of strength despite the brewing trade war.

Hanging over the labour market are President Donald Trump's tariffs on goods from some of America's largest trading partners, along with retaliatory charges. US tariffs on $34 billion worth of Chinese goods are due to come into effect on Friday.

Economists expect the manufacturing sector to bear the brunt of the tit-for-tat tariffs, through a slowdown in hiring and capital expenditure.

Yet the monthly figures landed the same day as President Donald Trump intensified a global trade war with United States levies on US$34 billion (RM137.36 billion) of Chinese goods, spurring retaliatory tariffs. But retailers shed 21,600 jobs, with the losses concentrated at general merchandise stores. There were gains in professional and business services employment as well as leisure and hospitality.

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