U.S. hiring slows in August as wage growth retreats
U.S. job growth slowed more than expected in August after two straight months of hefty increases, but the pace of gains should be more than enough for the Federal Reserve to announce a plan to start trimming a massive bond portfolio accumulated as it sought to bolster the economy.
Persistently sluggish wage growth could, however, make the U.S. central bank cautious about raising interest rates again this year. The Labor Department said on Friday nonfarm payrolls increased by 156,000 last month. The economy created 399,000 jobs in June and July.
“We see nothing here that prevents the Fed from initiating its balance-sheet reduction plan at the September meeting,” said John Ryding, chief economist at RDQ Economics in New York.
Average hourly earnings rose three cents or 0.1 per cent after advancing 0.3 per cent in July, keeping the year-on-year gain in wages at 2.5 per cent for a fifth consecutive month. The average workweek slipped to 34.4 hours from 34.5 hours in July.
U.S. stocks were trading higher, with the Dow hitting the 22,000 mark for the first time in more than two weeks. The dollar was little changed against a basket of currencies, while prices for U.S. Treasuries fell.
August’s moderation in employment growth, which pushed payroll gains below the 176,000 monthly average for this year likely reflects a seasonal quirk. Over the past several years, the initial August job count has tended to exhibit a weak bias, with revisions subsequently showing strength.
“The August payroll count does tend to be biased downward, typically reflecting seasonal difficulty in measuring the timing of back-to-school, as well as low initial response rates during the summer,” said Robert Rosener, an economist at Morgan Stanley in New York.
The department said Hurricane Harvey, which devastated parts of Texas, had no “discernable” effect on payrolls as the disaster struck after the survey period for the August employment report. Economists say the storm could hurt September payrolls if the disruption from the flooding is prolonged.
The smaller household survey showed a decline in employment last month. As a result, the unemployment rate ticked up one-tenth of a percentage point to 4.4 per cent.
Economists had forecast payrolls increasing by 180,000 jobs last month. Still, August’s gains were far more than the 75,000 to 100,000 jobs per month needed to keep up with growth in the working-age population.
The labor market has continued to strengthen even as hopes for a promised tax cut this year have faded.
Republican President Donald Trump on Wednesday reiterated his longstanding call for slashing the U.S. corporate tax rate to 15 per cent from 35 per cent at a time when lawmakers believe they would be lucky to bring it down to 25 per cent.
The Republican-led U.S. Congress faces a tough challenge in passing tax reform legislation, having already failed to deliver on healthcare reform sought by Trump.