Tag Archives: wage growth

U.S. labor costs accelerate in the first quarter

WASHINGTON (Reuters) – U.S. labor costs increased more than expected in the first quarter as wage growth picked up, further evidence that inflation will push higher this year as the economy reopens.

The Employment Cost Index, the broadest measure of labor costs, jumped 0.9% last quarter after gaining 0.7% in the October-December quarter. That lifted the year-on-year rate of increase to 2.6% from 2.5% in the fourth quarter.

The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack and a predictor of core inflation as it adjusts for composition and job quality changes. Economists polled by Reuters had forecast the ECI rising 0.7% in the first quarter.

Wages and salaries shot up 1.0% after advancing 0.8% in the fourth quarter. They were up 2.7% year-on-year. Economists expect wages will increase further in the second quarter as companies compete for scarce workers.

Despite employment being 8.4 million jobs below its peak in February 2020, businesses are struggling to find suitable workers as they rush to meet robust domestic demand.

Federal Reserve Chair Jerome Powell on Wednesday acknowledged the worker shortage saying “one big factor would be schools aren’t open yet, so there’s still people who are at home taking care of their children, and would like to be back in the workforce, but can’t be yet.”

Higher wages, if the worker scarcity persists, could contribute to boosting inflation this year, though many economists and Powell believe the anticipated surge in price pressures as the broader economy reopens will be transitory.

(Reporting By Lucia Mutikani)

Wall Street edges higher as strong jobs data offsets trade worries

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 28, 2018. REUTERS/Brendan McDermid

By Sruthi Shankar and Savio D’Souza

(Reuters) – U.S. stocks edged higher on Friday on stronger-than-expected job growth in June, offsetting concerns from a trade war between the United States and China.

Nonfarm payrolls increased by 213,000 jobs last month, the Labor Department said, topping expectations of 195,000, while the unemployment rate rose from an 18-year low to 4.0 percent and average hourly earnings rose 0.2 percent.

The moderate wage growth could allay fears of a strong build-up in inflation pressures, keeping the Federal Reserve on a path of gradual interest rate increases.

“It was what the market wanted to see: more jobs created than expected, wage growth moderate and creating jobs where you want to see them … It’s not just creating jobs it’s creating careers,” said J.J. Kinahan, chief market strategist at TD Ameritrade in Chicago.

The strong jobs data follows the minutes of the Federal Reserve’s latest policy meeting which showed policymakers discussed if recession lurked around the corner and expressed concerns trade tensions could hit an economy that by most measures looked strong.

Earlier stock futures were set for a more cautious start after the United States and China imposed tariffs on each other’s goods worth $34 billion, with Beijing accusing Washington of starting the “largest-scale trade war.”

President Donald Trump warned the United States may ultimately target over $500 billion worth of Chinese goods, but global markets remained broadly sanguine, though concerns about the conflict escalating capped appetite for risk.

“The expectation of things is always worse for the market than the reality,” said Kinahan. “We certainly have to pay attention to trade but it’s been expected for a long time.”

At 9:54 a.m. EDT the Dow Jones Industrial Average was down 19.67 points, or 0.08 percent, at 24,337.07, the S&P 500 was up 4.26 points, or 0.16 percent, at 2,740.87 and the Nasdaq Composite was up 34.68 points, or 0.46 percent, at 7,621.10.

Eight of the 11 major S&P sectors were higher, led by a 0.8 percent jump in the S&P healthcare index.

Biogen jumped 17.8 percent after the company and Japanese drugmaker Eisai Co said the final analysis of a mid-stage trial of their Alzheimer’s drug showed positive results.

Among the decliners were industrials, energy and materials indexes.

Boeing, the single largest U.S. exporter to China, slipped 0.7 percent and Caterpillar dropped 1.3 percent.

The Philadelphia Semiconductor index, which is made up of chipmakers most of whom rely on China for a substantial chunk of revenue, dropped 0.4 percent.

Advancing issues outnumbered decliners by a 1.65-to-1 ratio on the NYSE and by a 2.07-to-1 ratio on the Nasdaq.

The S&

P index recorded 10 new 52-week highs and two new lows, while the Nasdaq recorded 67 new highs and nine new lows.

(Reporting by Sruthi Shankar and Savio D’Souza in Bengaluru; Editing by Arun Koyyur)

U.S. economy gains 313,000 jobs in February; wage growth slows

Job seekers and recruiters gather at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth surged in February, recording its biggest increase in more than 1-1/2 years, but a slowdown in wage gains pointed to only a gradual increase in inflation this year.

Nonfarm payrolls jumped by 313,000 jobs last month, boosted by the largest rise in construction jobs since 2007, the Labor Department said on Friday. The payrolls gain was the biggest since July 2016 and triple the roughly 100,000 jobs the economy needs to create each month to keep up with growth in the working-age population.

The labor market is benefiting from strong domestic demand, an improvement in global growth as well as robust U.S. business sentiment following the Trump administration’s $1.5 trillion income tax cut package that come into effect in January.

Average hourly earnings edged up four cents, or 0.1 percent, to $26.75 in February, a slowdown from the 0.3 percent rise in January. That lowered the year-on-year increase in average hourly earnings to 2.6 percent from 2.8 percent in January.

The unemployment rate was unchanged at a 17-year low of 4.1 percent in February for a fifth straight month as 806,000 people entered the labor force in a sign of confidence in the job market. The average workweek rebounded to 34.5 hours after falling to 34.4 hours in January.

With Federal Reserve officials considering the labor market to be near or a little beyond full employment, the moderation in wage growth last month did little to change the view that the U.S. central bank will raise interest rates at its March 20-21 policy meeting.

Slow wage growth, however, could temper expectations the Fed will raise its rate forecast to four hikes this year from three. There is optimism that tightening labor market conditions will spur faster wage growth this year and pull inflation toward the Fed’s 2 percent target.

“While the employment gains unequivocally suggest underlying strength in the economy, wage gains remain muted enough for the Fed to continue with an only gradual normalization of the policy stance. Stock markets are reacting accordingly,” said Harm Bandholz, chief U.S. economist at UniCredit Bank in New York.

Speculation that the central bank would upgrade its rate projections was stoked by Fed Chairman Jerome Powell when he told lawmakers last week that “my personal outlook for the economy has strengthened since December.”

While Powell said there was no evidence of the economy overheating, he added “the thing we don’t want to have happen is to get behind the curve.”

Economists polled by Reuters had forecast payrolls rising by 200,000 jobs last month and the unemployment rate falling to 4.0 percent. Average hourly earnings had been expected to increase 0.2 percent in February.

Data for December and January was revised to show the economy adding 54,000 more jobs than previously reported.

U.S. stock indexes opened higher after the data while prices of U.S. Treasuries were trading lower. The dollar was largely unchanged against a basket of currencies.

CONSTRUCTION SHINES

Some companies like Starbucks Corp and FedEx Corp have said they would use some of their windfall from a tax cut package to boost workers’ salaries. Walmart announced an increase in entry-level wages for hourly employees at its U.S. stores effective in February.

The employment report suggested the economy remained strong despite weak consumer spending, home sales, industrial production and a wider trade deficit in January that prompted economists to lower their first-quarter growth estimates. Gross domestic product estimates for the January-March quarter are around a 2 percent annualized growth rate. The economy grew at a 2.5 percent pace in the fourth quarter.

The full impact of the tax cuts and a planned increase in government spending has yet to be felt, and a robust job market could heighten fears of the economy overheating.

“The economy is simply too strong,” said Chris Rupkey, chief economist at MUFG in New York. “There’s no reason whatsoever for the Federal Reserve to have a stimulative monetary policy at this stage of the business cycle.”

Economists expect the unemployment rate to fall to 3.5 percent this year. A broader 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 8.2 percent last month.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose three-tenths of a percentage point to a five-month high of 63.0 percent in February.

An even broader gauge of labor market health, the percentage of working-age Americans with a job, increased to 60.4 percent last month from 60.1 percent in January.

Employment gains were led by the construction sector, which added 61,000 jobs, the most since March 2007. Hiring at construction sites was likely boosted by unseasonably mild temperatures in February.

Manufacturing payrolls increased by 31,000 jobs, rising for a seventh straight month. The sector is being supported by strong domestic and international demand as well as a weaker dollar. Retail payrolls jumped by 50,300, the largest increase since February 2016.

The Labor Department said that was because on an unadjusted basis the sector hired fewer workers than usual for the holiday season and did not shed many jobs after the holidays. As a result, retail employment rose after the seasonal adjustment, the department said.

Government employment increased by 26,000 jobs last month, with hiring of teachers by local governments accounting for the bulk of the rise. There were also increases in payrolls for professional and business services, leisure and hospitality as well as healthcare and social assistance.

Financial sector payrolls increased by 28,000 last month, the most since October 2005.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao)

U.S. hiring accelerates; annual wage growth strongest since 2009

Job seekers line up to apply during "Amazon Jobs Day," a job fair being held at 10 fulfillment centers across the United States aimed at filling more than 50,000 jobs, at the Amazon.com Fulfillment Center in Fall River, Massachusetts, U.S., August 2, 2017.

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth surged in January and wages increased further, recording their largest annual gain in more than 8-1/2 years, bolstering expectations that inflation will push higher this year as the labor market hits full employment.

Nonfarm payrolls jumped by 200,000 jobs last month after rising 160,000 in December, the Labor Department said on Friday.

The unemployment rate was unchanged at a 17-year low of 4.1 percent. Average hourly earnings rose 0.3 percent in January to $26.74, building on December’s solid 0.4 percent gain.

That boosted the year-on-year increase in average hourly earnings to 2.9 percent, the largest rise since June 2009, from 2.7 percent in December. Workers, however, put in fewer hours last month. The average workweek fell to 34.3 hours, the shortest in four months, from 34.5 hours in December.

The robust employment report underscored the strong momentum in the economy, raising the possibility that the Federal Reserve could be a bit more aggressive in raising interest rates this year. The U.S. central bank has forecast three rate increases this year after raising borrowing costs three times in 2017.

“It definitely makes it a bit more likely that the Fed will have to do more than the three hikes that they’re currently planning for this year,” said Luke Bartholomew, investment strategist at Aberdeen Standard Investments.

Fed officials on Wednesday expressed optimism that inflation will rise toward its target this year. Policymakers, who voted to keep interest rates unchanged, described the labor market as having “continued to strengthen,” and economic activity as “rising at a solid rate.”

U.S. financial markets expect a rate hike in March. The dollar rose against a basket of currencies on the data. Prices for U.S. Treasuries fell, with the yield on the benchmark 10-year note rising to a four-year high. U.S. stock index futures slightly extended losses.

Economists say job gains are being driven by buoyant domestic and global demand.

Given that the labor market is almost at full employment, economists saw little boost to job growth from the Trump administration’s $1.5 billion tax cut package passed by the Republican-controlled U.S. Congress in December, in the biggest overhaul of the tax code in 30 years.

President Donald Trump and his fellow Republicans have cast the fiscal stimulus, which includes a reduction in the corporate income tax rate to 21 percent from 35 percent, as creating jobs and boosting economic growth.

According to outplacement consultancy firm Challenger, Gray & Christmas, only seven companies, including Apple, had announced plans to add roughly a combined 37,000 new jobs in response to the tax cuts as of the end of January.

Economists polled by Reuters had forecast nonfarm payrolls rising by 180,000 jobs last month and the unemployment rate unchanged at 4.1 percent. January’s jobs gains were above the monthly average of 192,000 over the past three months.

The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

JOB GAINS SEEN SLOWING

Job growth is expected to slow this year as the labor market hits full employment. Companies are increasingly reporting difficulties finding qualified workers, which economists say will force some to significantly raise wages as they compete for scarce labor.

Wage growth last month was likely supported by increases in the minimum wage which came into effect in 18 states in January. They probably also got a lift from the tax cut. Companies like Starbucks Corp and FedEx Corp have said they will use some of the savings from lower taxes to boost wages for workers.

Further gains are expected in February when Walmart raises entry-level wages for hourly employees at its U.S. stores. Annual wage growth is now close to the 3 percent that economists say is needed to push inflation towards the Fed’s 2 percent target.

The January household survey data incorporated new population controls. The department also released annual revisions to the payrolls data from the survey of employers and introduced new factors to adjust for seasonal fluctuations.

It said the level of employment in March of last year was 146,000 higher than it had reported, on a seasonally adjusted basis. The unemployment rate dropped seven-tenths of a percentage point in 2017 and economists expect it to hit 3.5 percent by the end of the year.

Employment gains were widespread in January. Manufacturing payrolls increased by 15,000 last month after rising 21,000 in December. The sector is being supported by strong domestic and international demand. A weak dollar is also providing a boost to manufacturing by making U.S.-made goods more competitive on the international market.

Hiring at construction sites picked up last month despite unseasonably cold weather. Construction payrolls increased by 36,000 jobs after rising 33,000 in December. Retail employment rebounded by 15,400 jobs in January after slumping 25,600 the prior month.

Government employment increased by 4,000 jobs following two straight months of declines. There were also increases in payrolls for professional and business services, leisure and hospitality as well as healthcare and social assistance.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)