Tag Archives: job market

Strong U.S. jobs report bolsters case for further Fed tightening

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employers hired more workers than expected in July and raised their wages, signs of labor market tightness that likely clears the way for the Federal Reserve to announce a plan to start shrinking its massive bond portfolio.

The Labor Department said on Friday that nonfarm payrolls increased by 209,000 jobs last month amid broad-based gains. June’s employment gain was revised up to 231,000 from the previously reported 222,000.

Average hourly earnings increased nine cents, or 0.3 percent, in July after rising 0.2 percent in June. That was the biggest rise in five months. On a year-on-year basis, wages increased 2.5 percent for the fourth straight month.

“The Fed set a low bar for balance sheet normalization to begin in September, and today’s number cleared that bar with elan,” said Michael Feroli, economist at JPMorgan in New York.

Although the economy is near full employment, wage growth has not been strong in part because many of the jobs being created are in low-wage industries. Last month, restaurants and bars added 53,100 jobs.

July’s monthly increase in earnings could, however, offer Fed policymakers some assurance that inflation will gradually rise to the U.S. central bank’s 2 percent target.

Economists expect the Fed will announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities at its next policy meeting in September. The Fed bought these securities to lower interest rates in the wake of the 2007-2009 financial crisis.

Sluggish wage growth and the accompanying benign inflation, however, suggest the Fed will delay raising interest rates again until December. It has increased borrowing costs twice this year and its benchmark overnight interest rate is in a range of 1 percent to 1.25 percent.

The dollar rose and was set for its biggest one-day gain versus a basket of currencies this year, while prices for U.S. Treasuries fell. Stocks on Wall Street edged higher. [.N]Economists had forecast payrolls increasing by 183,000 jobs and wages rising 0.3 percent in July.

Republican President Donald Trump, who inherited a strong job market from the Obama administration, cheered Friday’s employment data. “Excellent Jobs Numbers just released – and I have only just begun,” Trump said on Twitter. “Many job stifling regulations continue to fall. Movement back to USA!”

Trump has pledged to sharply boost economic growth and further strengthen the labor market by slashing taxes, cutting regulation and boosting infrastructure spending.

But after six months in office the Trump administration has failed to pass any economic legislation and has yet to articulate a plan for much of its economic agenda.

 

UNEMPLOYMENT RATE FALLS

Wage growth is crucial to sustaining the U.S. economic expansion after output increased at a 2.6 percent annual rate in the second quarter, an acceleration from the January-March period’s pedestrian 1.2 percent pace.

The economy also got a boost from another report on Friday showing a sharp drop in the trade deficit in June.

The unemployment rate dropped one-tenth of a percentage point to 4.3 percent in July, matching a 16-year low touched in May. It has declined five-tenths of a percentage point this year and is now at the most recent Fed median forecast for 2017.

“Stable year-on-year wage growth should decrease the perceived risk of further slowing in wages and prices,” said Andrew Hollenhorst, an economist at Citigroup in New York.

“Strong payroll gains that place downward pressure on the post-crisis low unemployment rate will keep the center of the Fed comfortable with increasing policy rates in December.”

July’s decline in the jobless rate came even as more people entered the labor force, underscoring job market strength.

The labor 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 62.9 percent. The share of the population that is employed climbed to 60.2 percent, matching an eight-year high touched in April.

A broad measure of unemployment, which includes people who want to work but have given up searching and those working part time because they cannot find full-time employment, was unchanged at 8.6 percent last month. This alternative gauge of unemployment hit a 9-1/2-year low in May.

Monthly job growth this year has averaged 184,000, close to the 2016 average of 186,000. The economy needs to create 75,000 to 100,000 jobs per month just to keep up with growth in the working-age population.

Manufacturing payrolls advanced by 16,000 jobs in July, the largest gain since February. Employment in the automobile sector rose by 1,600 despite slowing sales and bloated inventories that have forced manufacturers to cut back on production.

U.S. auto sales fell 6.1 percent in July from a year ago to a seasonally adjusted rate of 16.73 million units. General Motors Co and Ford Motor Co have both said they will cut production in the second half of the year.

Construction payrolls rose 6,000 last month as hiring at homebuilding sites increased 5,100. The professional and business services sector added 49,000 workers last month.

Retail employment rose by 900 as hiring at motor vehicle and parts dealerships as well as online retailers offset a drop of 10,000 in employment at clothing stores.

Companies like major online retailer Amazon are creating jobs at warehouses and distribution centers. Amazon this week held a series of job fairs to hire about 50,000 workers. Government payrolls rose by 4,000 in July.

(Reporting by Lucia Mutikani; Editing by James Dalgleish and Paul Simao)

 

U.S households see spending up, job prospects improving: New York Fed survey

- A shopper walks down an aisle in a Walmart Neighborhood Market in Chicago

WASHINGTON (Reuters) – Consumers expect to boost spending in the months ahead and voiced confidence they are more likely to find a job and less likely to lose one in a strong labor market, the New York Federal Reserve reported Monday in its latest monthly survey of consumer expectations.

Nearly 35 percent of the 1,300 heads of household included in the June poll said they were better off economically than a year go, a record in the four years the survey has been conducted.

The results bolster the current Fed outlook of an economy that continues to generate jobs despite tepid overall growth and some concern about a recent dip in inflation, improving chances the central bank can follow through with plans for a further interest rate increase later this year.

Though household expectations of inflation for the year ahead did dip slightly from the May survey, to 2.5 percent from 2.6 percent, respondents expect strong price increases of 2.8 percent over the coming three years. That’s consistent with the Fed’s current outlook that the recent weakness in inflation will prove temporary.

The survey also bolstered the view of continued strong consumption growth. Half of those polled said they expected to spend at least 3.3 percent more in the coming year, compared to median expected spending growth of 2.6 percent in the May survey. One-year-ahead expected earnings growth increased to 2.5 percent in the June survey from 2.2 percent in May.

Respondents also showed broad faith in the strength of the labor market, with a slight dip to 13.5 percent from 13.6 percent in the perceived probability of losing a job in the next year, and a jump to 59.2 percent from 56.7 percent in the probability of finding employment.

More than a fifth of respondents said they might leave a job voluntarily in the next year, up from 19.4 percent in May. Voluntarily job exits are considered a sign of a strong labor market that offers employees choices.

The online poll is designed to be a representative sample of the U.S. population. The New York Fed did not provide the margin of error for the poll.

 

(Reporting by Howard Schneider; Editing by Andrea Ricci)

 

Fed leaves interest rates unchanged, signals two hikes this year

Federal Reserve Chair Janet Yellen holds a press conference in Washington

By Jason Lange and Howard Schneider

WASHINGTON (Reuters) – The Federal Reserve kept interest rates unchanged on Wednesday and signaled it still plans two rate increases this year, saying it expects the U.S. job market to strengthen after a recent slowdown.

The U.S. central bank, however, lowered its economic growth forecasts for 2016 and 2017 and indicated it would be less aggressive in tightening monetary policy after the end of this year.

Fed policymakers gave no indication of when they might raise rates, though their projections leave the door open to an increase next month.

“The pace of improvement in the labor market has slowed,” the Fed said in a statement. It added, however, that “economic activity will expand at a moderate pace and labor market indicators will strengthen” even with gradual rate increases.

Updated projections from Fed policymakers point to annual economic growth of only 2 percent for the foreseeable future, slightly lower than forecast at the March policy meeting.

Policymakers have been worried about potential weakness in the U.S. labor market and the possibility of financial turmoil if Britain votes next week to leave the European Union. The Fed statement on Wednesday made no reference to that vote.

“It’s as dovish as the Fed can get without actually cutting rates. Even (Kansas City Fed President) Esther George withdrew her dissent. The path of rates is lower, which is a big dovish swing,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Fund Management.

Financial markets all but priced out a rate increase this year after the Fed statement, and U.S. short-term interest rate futures contracts rose. U.S. stocks held on to their pre-meeting gains.

Fed Chair Janet Yellen is scheduled to hold a news conference at 2:30 p.m. EDT (1830 GMT).

NO DISSENTS

The Fed left its target range for overnight lending rates between banks at between 0.25 percent to 0.50 percent, keeping on hold a campaign to lift borrowing costs that started late last year.

It raised rates in December for the first time in nearly a decade and signaled four increases were likely in 2016. Concerns about a global economic slowdown and volatility in financial markets subsequently reduced that number to two.

Although worries about the health of the global economy have eased, a sharp slowdown in U.S. hiring in May was unsettling. More recent data have indicated that last month’s jobs report may have been a blip.

The Fed statement said economic activity appeared to have picked up since April.

Economists polled by Reuters had seen virtually no chance that the Fed would raise rates on Wednesday. Most had expected it to do so in July or September on a view that the U.S. job market would bounce back and Britain’s EU referendum would not lead to a financial meltdown.

There were no dissents in the Fed’s rate decision on Wednesday.

(Reporting by Jason Lange and Howard Schneider; Additional reporting by David Chance; Editing by Paul Simao)