US: Job growth just keeps going…wage growth is picking up slightly

Job growth in the US “just keeps going……,” this was confirmed by the latest labour market report. We are unlikely to see much change here in the months ahead, so that the unemployment rate for the year will probably average below the four percent mark. A similarly low rate was last recorded in 2000, when the new economy triggered a singular economic situation. Even lower rates were only recorded to date at the end of the 1960s.

The results obtained from the ISM survey published in the last few days also point towards further employment growth. Sentiment in the industry and among service providers, which was already good, has visibly brightened further and points to almost consistent strong economic growth. The Fed will therefore no doubt continue to pursue its course of moderate monetary tightening.

According to the labour market report for August, non-farm payroll employment rose by 201,000 and the employment rate was unchanged from the previous month at 3.9 percent. The services sector, with an impressive increase of 178,000 once again justified its image as a major driver of jobs. As in previous months, however, jobs were not only created by the service providers but also in the manufacturing sector, even though the recent boost was not as strong as the year so far.

Other details of the report confirm that job growth remains in good shape. The decline in the number of long-term unemployed has even accelerated and the number of involuntary part-time workers has also fallen sharply.

It is therefore hardly surprising that wages in August have now increased by 0.4% over the previous month. On the contrary, we had already pointed out in the past that wage growth would probably increase before we see waning reserves across all sectors. This includes the involuntary part-time workers, as well as others workers that were reluctantly forced to leave the labour market during the crisis. Nonetheless, the increase in wages is still quite small; the 2.9 percent year-on-year increase just about matches the rise in consumer prices. Ultimately, the annual average rise in wages in 2018 will once again fall short of the rates of increase seen in previous phases of economic recovery.

The historically low unemployment rate that is prevailing again in the United States is of course primarily due to the prolonged economic upturn that has gained even more momentum recently – fuelled by tax cuts and other pro-business measures. We still expect the economy to grow by just short of three percent in its ninth year of recovery. However, the “dwindling” rate of unemployment is also supported by demographics, with the post-war baby-boom generation now leaving the labour market. In addition, the ageing process is also slowing down population growth in the US.


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