Job growth in US slows in December but wages climb

The employment report is another sign that shows President-elect Donald Trump is inheriting a healthy economy from Mr Barack Obama, with more employers saying there is a shortage of qualified workers.
The employment report is another sign that shows President-elect Donald Trump is inheriting a healthy economy from Mr Barack Obama, with more employers saying there is a shortage of qualified workers.PHOTO: AGENCE FRANCE-PRESSE

Gains still above a level that can absorb new entrants into labour market

WASHINGTON • US employment increased less than expected last month but a rebound in wages pointed to sustained labour market momentum that sets up the economy for stronger growth and further interest rate hikes from the Federal Reserve this year.

Non-farm payrolls increased by 156,000 last month, the Labour Department said yesterday.

The gains, however, still remain above a level that is considered sufficient to absorb new entrants into the labour market.

October and November's data was revised to show 19,000 more jobs added than previously reported. The economy created 2.16 million jobs last year.

Average hourly earnings went up 10 US cents (14.3 Singapore cents), or 0.4 per cent, after slipping 0.1 per cent in November.

The unemployment rate ticked up to 4.7 per cent from a nine-year low of 4.6 per cent in November as more people entered the labour force, a sign of confidence in the jobs market. The employment report added to data, from housing to manufacturing and auto sales, in suggesting that Mr Donald Trump is inheriting a strong economy from Mr Barack Obama's administration.

That pushed the year-on-year increase in average hourly earnings to 2.9 per cent, the largest rise since June 2009, from 2.5 per cent in November.

The unemployment rate ticked up to 4.7 per cent from a nine-year low of 4.6 per cent in November as more people entered the labour force, a sign of confidence in the jobs market.

The employment report added to data, from housing to manufacturing and auto sales, in suggesting that Mr Donald Trump is inheriting a strong economy from Mr Barack Obama's administration.

Mr Trump, who takes over on Jan 20, has pledged to boost spending on the country's ageing infrastructure, cut taxes and relax regulations. These measures are expected to lift growth this year.

But the proposed expansionary fiscal policy stance could increase the budget deficit.

That, together with faster economic growth and a labour market that is expected to hit full employment this year, could spark concerns about the Fed falling behind the curve on interest rate hikes.

The US central bank raised its benchmark overnight interest rate last month by 25 basis points to a range of 0.50 per cent to 0.75 per cent. The Fed forecast three rate increases this year.

Employment growth last year averaged 180,000 jobs per month, down from an average gain of 229,000 per month in 2015.

The slowdown is consistent with a labour market that is near full employment.

There has been an increase in employers saying they cannot fill vacant positions because they cannot find qualified workers. The skills shortage has been prominent in the construction industry.

Even as the labour market tightens, there remains some slack, which is holding back wage growth. The labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, rose one-tenth of a percentage point to 62.7 per cent last month.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 07, 2017, with the headline 'Job growth in US slows in December but wages climb'. Print Edition | Subscribe