Gains in US jobs and wages vastly higher than expected
The continued hiring and wage hikes reflect a tax-cut boost and reinforce expectations that the Fed will raise interest rates again in December
Washington — US workers enjoyed the biggest leap in pay since 2009 as job gains topped forecasts and the unemployment rate held at a 48-year low, a boost for President Donald Trump ahead of next week’s midterm elections and reason for the US Federal Reserve to keep raising interest rates.
Nonfarm payrolls rose 250,000 after a downwardly revised 118,000 gain, a labour Department report showed Friday. The median estimate in a Bloomberg survey called for an increase of 200,000 jobs. Average hourly earnings for private workers advanced 3.1% from a year earlier and the unemployment rate was unchanged from September at 3.7%, both matching projections.
The figures give Republicans another economic accomplishment to tout ahead of Tuesday’s midterm elections as they seek to defend control of Congress from what polls indicate will be Democratic gains. The continued hiring and wage increases also reflect a tax-cut boost and reinforce expectations that the central bank will raise interest rates for a fourth time this year in December, though such an outlook may further unsettle investors who just sent US stocks to their worst month since 2011.
“The labour market is cooking, and that’s the bottom line,” said Ward McCarthy, chief financial economist at Jefferies. “What’s really impressive is that the unemployment rate would’ve declined if the participation rate hadn’t risen, and that’s a good thing. You still have more people coming back to the labour market. There’s a lot to like.”
US stock futures declined after the report, while the dollar trimmed losses and 10-year Treasury yields were higher.
The October data may be less of an indicator of the trend than usual because they reflect distortions from hurricanes both in 2018 and 2017. Meanwhile, the US trade war with China poses a risk to further gains and companies may be slowing capital investment.
The labour department said 198,000 people were not at work due to bad weather, reflecting Hurricane Michael’s effect on Florida, following 299,000 in September amid Hurricane Florence. That compares with 36,000 people not at work due to weather in the year-ago period. Michael had “no discernible effect” on national employment and unemployment estimates for October, the labour department said.
Restaurants and bars — an industry where most workers only get paid if they show up to work — saw a 33,500 increase in payrolls, following a 10,000 decrease in September that reflected Florence’s effect.
Average hourly earnings rose 0.2% from the prior month, also matching analyst projections, following a 0.3% gain, the report showed. The annual increase of 3.1% followed a 2.8% advance.
The year-over-year change reflects possibly storm-boosted figures in October and storm-depressed numbers the prior year, though companies have also been steadily raising pay to attract and retain workers.
Even so, the long-awaited gains follow relatively tepid increases throughout the current expansion, which in mid-2019 will become the longest in US history. The advances are probably still not rapid enough, though, to spur inflation concerns among Fed officials, rather keeping them on a path of gradual interest-rate hikes.