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US jobs report: 178,000 new jobs added, making Fed rate hike likely US jobs report: 178,000 new jobs added, making Fed rate hike likely
(about 2 hours later)
The final US jobs report of 2016 saw 178,000 new jobs added, very close to economists’ expectations of 180,000 for November. An interest rate rise in the US looks a near certainty after another solid month of job creation in the world’s largest economy.
Hourly wages declined by 3 cents an hour to $25.89, and overall unemployment declined by 387,000 to 7.4 million, though retail jobs fell slightly from October to November – atypical for the Christmas shopping season. PNC analyst Augustine Faucher called the wage dip “a big soft spot”. In a boost to Donald Trump as he prepares to move into the White House next month, government figures showed the unemployment rate dropped to a nine-year low in November and employers hired new workers at a faster pace as they banked on a rebound in economic growth.
A rate hike from the Federal Reserve later this month depended on numbers sticking close to those predictions; now, it is all but certain. Behind the upbeat headline figures were signs that some US workers are yet to feel the gains of an improving labor market as wages fell and as many Americans gave up looking for work.
Deputy treasury secretary Chris Lu said that president-elect Donald Trump was inheriting a far better economy than the one Obama had inherited from George W Bush, but “the unfinished business is wages”. But that is unlikely to deter policymakers on the Federal Reserve’s Open Market Committee (FOMC) from raising interest rates at their meeting later this month, economists said.
“On the back of largely positive economic data throughout autumn, a rate rise is widely expected for the December meeting of the FOMC. The positive employment data from November are probably the last piece of confirmation the members of the committee were waiting for,” said Kay Daniel Neufeld at the consultancy the Centre for Economics and Business Research.
The final US jobs report of 2016 saw 178,000 new jobs added, close to economists’ expectations of 180,000 for November. The unemployment rate dropped to 4.6% from 4.9% in October and was the lowest since August 2007, before the global financial crisis struck.
Deputy labor secretary Chris Lu said that President-elect Trump was inheriting a far better economy than the one outgoing president Barack Obama had inherited from George W Bush, but “the unfinished business was wages”.
“I think the working-class and middle-class Americans who voted for the president-elect are expecting not only for their jobs to stay here but for their wages to go up, and we know what the policy solutions are,” Lu told the Guardian.“I think the working-class and middle-class Americans who voted for the president-elect are expecting not only for their jobs to stay here but for their wages to go up, and we know what the policy solutions are,” Lu told the Guardian.
“The tighter job market is pushing up wages as businesses compete for workers, but the process is gradual,” he said. Unemployment was at its lowest since August 2007, but Faucher said that wasn’t entirely good news. “It fell in part because of a contraction in the labor force of 226,000, with the labor force participation rate declining to 62.7%, its lowest since June,” Faucher noted. “The tighter job market is pushing up wages as businesses compete for workers, but the process is gradual,” he said.
Still, he said, things were looking up – the analyst predicted improvement through 2017 and said little would stand in the way of the rate hike now. “The economy is close to full employment, and the [Federal Open Market Committee] FOMC wants to start gradually raising interest rates before the economy reaches full employment and wage pressures accelerate too much and spark much higher inflation.” PNC expects two interest rate increases in 2017 followed by three in 2018. The figures from the US labor department showed hourly wages declined by 3 cents an hour to $25.89.
Though emphasis from the political sphere has been on manufacturing since Donald Trump claimed credit for keeping 850 unionized manufacturing jobs in Indiana on Thursday, service sector jobs, where most Americans work, registered important changes during the month. “Job gains were concentrated in private service industries,” Faucher noted. Augustine Faucher, analyst at the bank PNC, called the wage dip “a big soft spot”.
The biggest gains in a single industry came from ambulatory healthcare – which includes outpatient clinics and other services. In October, the labor secretary, Tom Perez, told the Guardian he believed the jobs created by the Affordable Care Act had been instrumental in the increase. Faucher also noted the drop in unemployment was not entirely good news. “It fell in part because of a contraction in the labor force of 226,000, with the labor force participation rate declining to 62.7%, its lowest since June,” he said.
November saw about 19,000 new jobs in food service, while home care added 2,200 and retail lost 8,300. Manufacturing jobs were down by about 4,000. James Smith, economist at the bank ING, said there were reasons to think the wage dip was a one-off and that pay would soon rise again.
Adult men fared best in November, when unemployment decreased for them to 4.3%. White unemployment stood at 4.2% for the month; for black workers the figure was 8.1% and for Hispanics 5.7%. “That weak wage figure will probably raise a few eyebrows among some of the more dovish Fed voters. But it would have had to have been a really disastrous jobs report to have derailed the FOMC’s plans to hike in December,” he said.
Retail is particularly important during the sector’s “hard eight” weeks of Christmas and other year-end shopping. Post-Thanksgiving Black Friday sales dropped to $290m this year, though the shopping event attracted more customers; brick-and-mortar retailers remain in stiff competition with online outlets pushing sales in tandem with the notorious “door-buster” deals at national retail chains. This year, Macy’s, Walmart and Target started their sales the evening of Thanksgiving in an effort to draw shoppers and compete with online giants like Amazon. Retail jobs had fallen in October; this month they fell further to about 16m. “In fact, assuming that the latest wage growth figure was a blip, we still think that the labor market is strong enough to support two hikes from the FOMC next year.”
“That might be a shift to online retail,” Lu said. Retail sales indicators are up, Lu said, but more and more consumers are buying from online businesses with fewer staff. Trump secured the presidency after campaigning on a platform of anti-globalization and pledges of job creation for US workers. He also vowed to increase spending on infrastructure, something many economists believe will give the US economy a significant boost next year.
Many workers still can’t make ends meet even with multiple jobs. “I take one day off from home health, but when I do that I do deliveries all day long,” said April Shabazz of Merriam, Kansas, who protested with Fight for 15 workers on Tuesday. “I’ve been in home health since I was 15, so 30 years.” Shabazz said she works every day of the week, sometimes as a delivery driver for GrubHub, sometimes as a home healthcare worker. If the billionaire Republican delivers on his spending promise, inflation is also seen as likely to pick up, which would push the US central bank under chair Janet Yellen into more rate rises next year.
Economic growth is uneven, as Shabazz and others like her often find themselves at odds with news of expanded prospects. “I don’t know if it’s necessarily ever been better,” she told the Guardian. “The cost of living is going up, but our pay is not going up.” Fed policymakers, investors and analysts alike would now be closely watching the new president to gauge how much of his campaign talk would become policy, said Nancy Curtin, chief investment officer at Close Brothers Asset Management.
“If, as expected, we see a swing towards fiscal stimulus, this may give the Fed greater scope to hike rates further in 2017. Fed decision making will no longer be solely data dependent, but policy dependent also,” said Curtin.
The prospect of higher inflation has also raised fears for living standards being squeezed further if wage growth does not keep pace with costs.
Many workers still report they cannot make ends meet even with multiple jobs.
“I take one day off from home health, but when I do that I do deliveries all day long,” said April Shabazz of Merriam, Kansas, who protested with Fight for 15 workers this week as part of calls for fairer minimum wages nationwide.
“I’ve been in home health since I was 15, so 30 years,” Shabazz said, adding that she works every day of the week, sometimes as a delivery driver for GrubHub, sometimes as a home healthcare worker.
“The cost of living is going up, but our pay is not going up,” she told the Guardian.