U.S. layoffs abate; job openings plunge

WASHINGTON (Reuters) – Layoffs in the United States fell in April, but remained the second-highest on record, while job openings dropped, suggesting the labor market could take years to recover from the COVID-19 crisis despite a surprise rebound in employment in May.

The Labor Department said on Tuesday in its monthly Job Openings and Labor Turnover Survey, or JOLTS, that layoffs and discharges dropped 3.8 million in April to 7.7 million.

That was the second-highest level since the government started tracking the series in 2000. The layoffs and discharge rate fell to 5.9% in April from a record high of 7.6% in March.

The labor market was slammed by the closure of nonessential businesses in mid-March to slow the spread of COVID-19. Many establishments reopened in May, with the economy adding a stunning 2.509 million jobs last month after a record 20.7 million plunge in April, government data showed on Friday.

Despite last month’s rebound in hiring, economists warn it could take even a decade for the labor market to recoup all the jobs lost during the COVID-19 recession. The National Bureau of Economic Research, the arbiter of U.S. recessions, declared on Monday that the economy slipped into recession in February.

The NBER does not define a recession as two consecutive quarters of decline in real GDP as is the rule of thumb in many countries, instead, it looks for a drop in economic activity, spread across the economy and lasting more than a few months.

The government also reported that job openings, a measure of labor demand, declined 965,000 to 5.0 million on the last business day of April, the lowest since December 2014.

The job openings rate dropped to 3.7%, the lowest since January 2017, from 3.8% in March. Vacancies peaked at 7.52 million in January 2019.

Hiring tumbled 1.6 million to a record low of 3.5 million in April. The hiring rate plunged to an all-time low of 2.7% from 3.4% in March.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

Amazon to offer permanent roles to 70% of 175,000 new U.S. hires

By Jeffrey Dastin

(Reuters) – Amazon.com Inc plans to offer permanent jobs to about 70% of the U.S. workforce it has hired temporarily to meet consumer demand during the coronavirus pandemic, the company told Reuters on Thursday.

The world’s largest online retailer will begin telling 125,000 warehouse employees in June that they can keep their roles longer-term. The remaining 50,000 workers it has brought on will stay on seasonal contracts that last up to 11 months, a company spokeswoman said.

The decision is a sign that Amazon’s sales have increased sufficiently to justify an expanded workforce for order fulfillment, even as government lockdowns ease and rivals open their retail stores for pickup.

Amazon started the hiring spree in March with a blog post appealing to workers laid off by restaurants and other shuttered businesses, promising employment “until things return to normal and their past employer is able to bring them back.”

Seattle-based Amazon did not disclose how much it was spending to make the positions permanent and whether that cost would be in addition to the $4 billion it has forecast for virus-related expenses.

The permanent roles come with benefits that seasonal workers lack, such as employer-offered health insurance and retirement plans.

Some Amazon staff, unions and elected officials have said the company has put employees’ health at risk by keeping nearly all its warehouses operational during the pandemic. At least 800 U.S.-based workers have tested positive for the highly contagious virus, according to figures compiled by one employee, which Amazon has not commented on.

The company has increased cleaning, added social distancing measures and offered face masks, fever checks and virus tests in response.

Amazon said it had 840,400 full and part-time staff at the end of last quarter while it still was in the process of hiring. It has not reported an updated number.

(Reporting by Jeffrey Dastin in San Francisco; Editing by Edwina Gibbs)

U.S. civil rights agency says employers can test workers for COVID-19

By Daniel Wiessner

(Reuters) – The U.S. agency that enforces civil rights laws against disability discrimination said on Thursday that companies can test employees for COVID-19 before permitting them to enter the workplace as long as the tests are accurate and reliable.

The Equal Employment Opportunity Commission (EEOC) last month said employers may take workers’ temperatures without violating the the Americans with Disabilities Act (ADA), but Thursday’s guidance appears to authorize a broader array of testing options.

The commission said mandatory medical testing, which is generally prohibited by the ADA, is allowed if it is “job related and consistent with business necessity.”

Applying that standard, the new guidance allows employers to take steps to determine if employees entering the workplace have COVID-19, the illness caused by the novel coronavirus, because the virus poses a “direct threat” to the health of others.

But before implementing testing, employers should review standards from the U.S. Food and Drug Administration and other authorities about which type of testing is considered safe and accurate, the commission said.

And employers who test workers should still require employees to observe infection control practices, such as social distancing and regular handwashing, to prevent transmission of the coronavirus.

The EEOC announcement comes as some states begin to lift shelter-in-place orders and allow businesses to reopen and their employees to return to work.

(Reporting by Daniel Wiessner in Albany, New York; Editing by Aurora Ellis)

Trump, Powell met Monday at White House to discuss economy

By Howard Schneider

WASHINGTON (Reuters) – U.S. President Donald Trump and Federal Reserve Chair Jerome Powell met at the White House on Monday morning, their second meeting since Powell started the job in February 2017 and soon after became the target of frequent criticism from the president who had appointed him.

The Fed announced the meeting in a morning press release, noting they met “to discuss the economy, growth, employment and inflation.”

“Everything was discussed including interest rates, negative interest, low inflation, easing, Dollar strength & its effect on manufacturing, trade with China, E.U. & others, etc.,” Trump tweeted soon after, calling the session “good & cordial.”

The Fed’s wording closely followed its description of Powell’s first meeting with Trump, this past February, over a dinner that also included Vice Chair Richard Clarida.

Trump’s tweet marked a change in tone. The president in recent months derided Powell and colleagues as “pathetic” and “boneheads” for not cutting interest rates, and in August labeled Powell personally as an enemy of the United States on a par with China leader Xi Jinping.

The Fed in its statement was careful to note what wasn’t discussed: Powell’s expectations for future monetary policy. Trump has for more than a year charged the Fed with undermining his economic policies by, in his view, keeping interest rates too high, and depriving the United States of what Trump feels are the benefits of the negative rates of interest set by the European and Japanese central banks.

The U.S. central bank has cut rates three times this year – in part to offset what it views as damage done by the Trump administration’s trade war with China. But after their last meeting, in October, policymakers signaled they would lower rates no further unless the economy takes a serious turn for the worse.

Less than 24 hours after that decision, Trump laid into Powell again, saying people are “VERY disappointed” in him and the Fed. And only last week, Trump lobbed another dig in a tweet that noted inflation was low: “(do you hear that Powell?)”

CONSISTENT

Powell “did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming information that bears on the outlook for the economy,” the Fed said in its statement.

Powell appeared before congressional committees twice last week, and the Fed said his comments to Trump were “consistent” with his statements to lawmakers.

“Chair Powell said that he and his colleagues on the Federal Open Market Committee will set monetary policy, as required by law, to support maximum employment and stable prices and will make those decisions based solely on careful, objective and non-political analysis.”

The meeting included Treasury Secretary Steven Mnuchin.

Powell met with Trump in February, and in each of the three following months the two had a brief phone conversation. That compares with the three times his predecessor, Janet Yellen, met President Barack Obama at the White House; Yellen also met with Trump during her final year as Fed chair.

Powell’s has made much more extensive and deliberate efforts to court members of the House and Senate, even as Trump expressed regret for appointing Powell and reportedly explored whether he could remove him.

Fed chairs are appointed to four-year terms by the president, but once confirmed by the Senate are intended to be insulated from White House political pressure over how to manage monetary policy. They can only be removed “for cause,” not over a disagreement over policy.

Meetings between Fed chairs and presidents are not unprecedented but they are infrequent, as opposed to the nearly weekly sessions that central bankers have with the head of the Treasury.

(Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci)

Not a baby factory: South Korea tries to fix demographic crisis with more gender equality

A volunteer takes care of a baby who was left in the baby box at Jusarang Community Church in Seoul, South Korea, December 18, 2018. REUTERS/Kim Hong-Ji

By Joori Roh

SEOUL (Reuters) – In just over a decade, South Korea has spent the equivalent of a small European economy trying to fix its demographic crisis, yet birthrates have dropped to the lowest in the world.

This year, President Moon Jae-In, who describes himself as a feminist president, is testing a new angle: showing women more respect.

At the end of last year, South Korea announced plans to remove some of the disincentives for employing women, allowing both parents to take parental leave at the same time and extending paid paternal leave. Employers also get incentives to allow either parent to work fewer hours.

“Efforts on gender equality are very timely,” said Shin Eun-kyung, an economist with the Organisation for Economic Co-operation and Development. South Korea is the worst place for women to work in the OECD, despite women being among the organization’s best educated, and more highly so than men.

But the measures go beyond the workplace: mothers can choose to give the baby their own last name and a tickbox on birth certificates showing whether a baby was born outside marriage will be removed.

Fertility treatments will be offered to single women and unmarried couples as well. Social campaigns will encourage men to participate more in child care and household chores.

Contrast that with a 2016 effort by the previous government, run by the country’s first woman president, Park Geun-hye, which launched a website carrying a real-time statistical heatmap of women of child-bearing age, marriages and births in the hope of spurring competition between cities and regions.

The website was taken down after one day, with women complaining it made them feel like “reproductive organs”.

“The country sees women as baby factories,” says Hong Sook-young, who produces the country’s most popular children TV show. Asked about the latest measures, Hong said “at least pretending to hear what people really want is a start toward change”.

 

TEMPLE BONDING

South Korea’s demographic time bomb is ticking louder. The government’s latest forecast sees its population declining from 2027, and a presidential committee said the country’s economic growth potential could fall to below 1 percent.

Birth rates have long been a policy priority: since 2006, the government has spent 152.9 trillion won ($135.65 billion) – about the size of an economy like Hungary or Nevada – on perks for families and subsidies for children from birth through university and beyond. Last year’s 26.3 trillion low birth policy budget was more than half the defense spending of a country technically still at war with its northern neighbor.

But demographic experts say money is not the main issue: the experience of advanced countries with higher birth rates, such as France or Sweden, shows gender equality plays a crucial role.

The previous allocation of resources drew criticism as well.

The government went far beyond child allowances and subsidizing care and education. For instance, it funded temple stays for family bonding and financed youth seeking brief jobs abroad.

Many such programs will end, with the 2019 birth-support budget cut by a quarter, to 20.5 trillion won.

“It should have been cut a long time ago,” said Jung Jae-hoon, social welfare professor at Seoul Women’s University.

Jung cautioned, however, the signal the government was finally sending will take a long time to filter through the conservative East Asian society.

Births outside marriage, for instance, are so widely frowned upon that they amount to only 1.9 percent of the total, the lowest anywhere. Experts compare that to France, where the ratio is over 50 percent and the birth rate is 1.9 versus South Korea’s 1.05. Abortion is illegal and adoption rules very strict.

The stigma of out-of-wedlock babies has seen Seoul’s Jusarang Community Church build an oven-sized “baby box”, with cushions and a heating system into its outside wall.

Last year, 261 children were abandoned across the country, according to Statistics Korea.

JOBS FOR MEN

About 56 percent of women aged 15-64 work in South Korea, below the OECD average of almost 60 percent, and 72-75 percent in Denmark and Sweden, where birth rates are among the highest of advanced economies.

Recruiters say married young women are less likely to get job opportunities due to discrimination.

In November, the Supreme Court upheld a four-year jail sentence against a former CEO of state-run Korea Gas Safety Corp over manipulating interview scores to knock women out of the hiring process.

While Samsung Electronics has a more balanced gender ratio than Apple globally, with women accounting for 45 percent of the staff versus a third at its U.S. rival, only one in four staff at its Korea headquarters are women. None of the nine board members at Hyundai Motor Co are women, versus six out of 12 at General Motors.

“The whole period of before, during and after childbirth weighs on our career,” said a female assistant manager at Hyundai Motor. The pay gap between sexes only makes it harder, she added.

South Korea’s gender wage gap is highest among advanced countries at 34.6 percent, above OECD average of 13.8 percent.

A Hyundai Motor spokeswoman said the firm was committed to providing equal opportunities to all employees and opposes discrimination. A Samsung Electronics spokeswoman said the company has been recruiting more females, including in managerial positions, and that most staff return to work after parental leave and its daycare centers can look after 3,000 children.

WEAK ECONOMY

Still, critics say while Moon’s approach to birth rates is an improvement, his job and housing policies discourage parenthood. Minimum wage hikes have led to higher unemployment, while larger downpayment requirements have made homes unaffordable for many.

“Creating a structure that enables us to have our own house is mostly needed,” said Lee Kyoung-min, a store manager at Lotte Mart, a father of three.

Some also argue work-life balance could be better: Moon in July cut the working week to 52 hours from 68, but South Koreans still work 15 percent longer than the OECD average.

If birth rates don’t improve, South Korea’s economy could be 5 percent smaller by 2060, as productivity falls and higher spending for elderly care leaves less room for investment, the National Assembly Budget Office estimates.

Industries catering for babies are struggling. Seoul has lost one in four maternity wards and in 2018 the capital sacked more than half its teachers.

Ryu Won-woo, manager of baby fair organizer BeFe, praised the government’s measures, especially those encouraging more responsibilities for dads. But he does not expect quick results.

“More local baby-product companies may disappear before Korea sees more babies,” Ryu said.

(Reporting by Joori Roh; Editing by Marius Zaharia and Lincoln Feast.)

Strong U.S. jobs data boosts stocks, soothes economic fears

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 27, 2018. REUTERS/Eduardo Munoz

By April Joyner

NEW YORK (Reuters) – World stock markets rallied on Friday while bond yields rose after sharply declining earlier in the week as Beijing announced a new round of trade talks with Washington and U.S. employment data pointed to economic strength.

Equities around the globe were buoyed by the news that China and the United States will hold trade talks in Beijing on Monday and Tuesday.

In the United States, stocks got another boost as stronger-than-expected U.S. employment data soothed some concerns of slowing economic growth. That was welcome news to investors after sharp declines on Thursday following Apple Inc’s cut in its revenue forecast.

“As nervous as we all were yesterday on this Apple news, this does help to soften that a bit, that maybe the consumer or the average person still is more confident than we are giving them credit for,” said J.J. Kinahan, chief market strategist at TD Ameritrade in Chicago.

The strong U.S. jobs report raised questions among some market watchers about the Federal Reserve’s monetary policy, which has been scrutinized in recent weeks as economic worries have mounted. However, Wall Street surged further after Fed Chair Jerome Powell spoke at a meeting of the American Economic Association and said he would not resign if asked to by U.S. President Donald Trump.

Conversely, safe-haven assets that had climbed this week as equity markets were roiled came down substantially. Treasury yields rose sharply after the release of U.S. employment data, and the dollar gained 0.6 percent against the yen. Spot gold prices, which reached a six-month peak on Thursday, dropped 0.8 percent.

In U.S. equities, the Dow Jones Industrial Average rose 681.9 points, or 3.01 percent, to 23,368.12, the S&P 500  gained 66.58 points, or 2.72 percent, to 2,514.47 and the Nasdaq Composite added 218.87 points, or 3.39 percent, to 6,682.37.

The pan-European STOXX 600 index jumped 2.67 percent, while MSCI’s gauge of stocks across the globe gained 2.16 percent.

Benchmark 10-year Treasury notes last fell 32/32 in price to yield 2.6641 percent, from 2.553 percent late on Thursday.

Earlier, an announcement from China’s central bank that it would cut the amount of cash that banks must hold as reserves for the fifth time in the past year lifted Asian and European stocks. The move frees $116 billion for new lending as Beijing tries to reduce the risk of a sharper economic slowdown.

Japanese equity markets, which opened for their first session of the new year, were the main exception, weighed down by the sharp rise in the yen in the past few days.

The news of the U.S.-China trade talks boosted oil prices, with both Brent and U.S. crude futures around 4 percent higher.

 

(Reporting by April Joyner; Additional reporting by Virginia Furness, Swati Pande, Wayne Cole and Chuck Mikolajczak; editing by Jon Boyle, Larry King and Dan Grebler)

Central Americans stalled at U.S.-Mexico border, mull work offers

A migrant from Honduras, part of a caravan of thousands traveling from Central America to the United States, prepares to get on a bus bound for Mexicali at a makeshift camp in Navojoa, Mexico November 17, 2018. REUTERS/Kim Kyung-Hoon

By Lizbeth Diaz

MEXICALI, Mexico (Reuters) – Hundreds of migrants from a caravan of Central Americans were stalled at the U.S.-Mexico border on Saturday, where a handful said they welcomed recent Mexican offers of employment in the face of a hostile U.S. reception.

The Mexican government last week reiterated job offers to the migrants, saying that those who obtained legal status could occupy thousands of vacancies, most of them in the country’s “maquiladoras,” doing factory work.

Since arriving at the border last week, they have been denied entry through the gates linking Mexico to the United States.

Dozens of the mostly Hondurans waited in lines to bathe and washed clothes sullied from 2,600 miles of relentless travel.

Several members of the caravan, which left the crime-wracked city of San Pedro Sula, Honduras, on Oct. 13, told Reuters they would be willing to stay put in Mexico rather than face rejection across the border.

“If we had work, we would stay. This has been very tiring,” said Orbelina Orellana, a 26-year-old Honduran mother of three, waiting at the Alfa and Omega shelter in the city of Mexicali, which borders Calexico, California.

“I cry a lot to not be able to feed them as I’d like,” Orellana said of her children. “I just want an opportunity.”

Briefly stalled by Mexican riot police on a highway crossing between two southern Mexican states late last month, a dozen migrants told Reuters they rejected such offers, preferring to try their luck in the United States.

But on Saturday, some said that thinking had changed.

“We had the idea to cross to the United States, but they told us it will be nearly impossible,” said Mayra Gonzalez, 32, traveling with her two children. “We cannot starve as we wait to find out if they’ll give us asylum. Better to work, by the grace of God, here in Mexico.”

In a sharp reversal of longstanding U.S. policy, President Donald Trump’s administration last week began enforcing new rules that curtail asylum rights for anyone who arrives without documents at the U.S. border.

Trump earlier this month deployed almost 6,000 troops along the long U.S. border with Mexico.

As they wound north through Mexico, the migrants were helped along by local authorities and residents who offered food, clothing and even free rides on daily treks that averaged 30 miles a day, much of it on foot.

But that welcome became noticeably frostier as the caravan reached the border.

In Tijuana, a city long accustomed to a population of migrants in transit, deportees and U.S. pleasure-seekers, a clutch of local residents last week threw rocks at the migrants, telling them to go home.

But some said the Central Americans could help boost the local economy.

“We are not against migration,” Ulises Araiza, President of the Association of Human Resources of Industry in Tijuana, told Reuters.

“We know the situation that these people face in their country. But we also favor order so as to integrate them into the labor sector, because only in Tijuana do we have a demand in the maquiladora industry for 5,000 people.”

(Writing by Delphine Schrank, editing by G Crosse)

U.S. consumer confidence at 18-year high; house price gains slow

FILE PHOTO - A home for sale is seen in Santa Monica, California, U.S., March 21, 2017. REUTERS/Lucy Nicholson

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer confidence rose to an 18-year high in October, driven largely by a robust labor market, bolstering expectations that strong economic growth would continue through early 2019.

But a weakening housing market and tightening financial market conditions are casting a shadow on the economic expansion that is in its ninth year, the second longest on record. Home price gains slowed further in August, other data showed, another sign that higher mortgage rates were weighing on housing demand.

“We don’t know how long this is going to hold up, but the consumer is bullish on the outlook and this means the economy is going to continue to advance in this long economic expansion from the last recession,” said Chris Rupkey, chief economist at MUFG in New York.

The Conference Board said its consumer confidence index reading rose to 137.9 this month, the highest since September 2000, from a downwardly revised 135.3 in September. Economists polled by Reuters had forecast the consumer index slipping to 136.0 from the previously reported 138.4 in September.

Consumers’ assessment of current business and labor market conditions improved despite a sharp stock market sell-off and jump in U.S. Treasury yields, which have tightened financial market conditions. The stock market’s S&P 500 index has dropped more than 8 percent this month.

The Conference Board survey puts more emphasis on the labor market. The survey’s so-called labor market differential, derived from data about respondents saying jobs are scarce or plentiful, was the most favorable since January 2001.

This measure closely correlates to the unemployment rate in the Labor Department’s employment report. Economists said it raised the possibility that the unemployment rate could drop further from a near 49-year low of 3.7 percent. The government will publish its October employment report on Friday.

“At the end of the day, it is the job market, or the security of having a job with a regular paycheck, that supports confidence and spending,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. “So far, so good.”

Consumer confidence at multi-year highs bodes well for spending in the upcoming holiday season. More consumers planned to buy automobiles and houses over the next six months, but the share of those intending to purchase major appliances slipped.

The dollar was near a 2 1/2-month high against a basket of currencies, while stocks on Wall Street were higher. U.S. Treasury yields rose.

HOUSING DEMAND SOFTENING

The economy grew at a 3.5 percent annualized rate in the third quarter and is considered on course to achieve the Trump administration’s target of 3.0 percent annual growth this year.

Growth has been spurred by a $1.5 trillion tax cut. Economists estimate the tax cut stimulus peaked in the third quarter and expect growth to gradually slow from the second half of 2019, restrained in part by higher interest rates.

The Federal Reserve has increased borrowing costs three times this year and in September removed a reference to monetary policy remaining “accommodative” from its policy statement. The U.S. central bank is expected raise rates gain in December.

Higher borrowing costs have cooled housing demand; sales and homebuilding declined in September.

A separate report on Tuesday showed the S&P CoreLogic Case-Shiller composite home price index of 20 U.S. metropolitan areas rose 5.5 percent in August from a year ago after increasing 5.9 percent in July. Growth in house prices has slowed from as high as 6.8 percent in March. Prices had been boosted by a shortage of properties on the market, but now mortgage rates have risen to seven-year highs.

“The sharp gain in mortgage rates thus far in 2018 continues to weigh on home sales as well as home prices,” said Brent Campbell, an economist at Moody’s Analytics in West Chester, Pennsylvania.

“With the Fed continuing to tighten monetary policy through the rest of 2018 and into 2019, mortgage rates are likely to rise, even more, resulting in less housing demand and modest house price growth in 2019.”

(Reporting By Lucia Mutikani; Editing by David Gregorio)

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)

U.S. job growth cools as labor market nears full employment; wages rise

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 slowed more than expected in December amid a decline in retail employment, but a pick-up in monthly wage gains pointed to labor market strength that could pave the way for the Federal Reserve to increase interest rates in March.

Nonfarm payrolls increased by 148,000 jobs last month after surging by 252,000 in November, the Labor Department said on Friday. Retail payrolls decreased by 20,300 in December, the largest drop since March, despite reports of a strong holiday shopping season.

The unemployment rate was unchanged at a 17-year low of 4.1 percent. Economists polled by Reuters had forecast payrolls rising by 190,000 in December. The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

“We do not think that today’s employment report will keep the Federal Reserve from tightening again at the March policy meeting, given other strong recent economic data,” said David Berson, chief economist at Nationwide in Columbus, Ohio.

Job growth surged in October and November after being held back in September by back-to-back hurricanes, which destroyed infrastructure and homes and temporarily dislocated some workers in Texas and Florida.

Taking some sting out of the moderation in job gains, average hourly earnings rose 9 cents, or 0.3 percent, in December after a 0.1 percent gain in the prior month. That lifted the annual increase in wages to 2.5 percent from 2.4 percent in November.

Prices of U.S. Treasuries were mostly flat while the U.S. dollar <.DXY> was slightly stronger against a basket of currencies. U.S. stock indexes opened at fresh record highs.

Employment gains in December were below the monthly average of 204,000 over the past three months. Job growth is slowing as the labor market nears full employment, but could get a temporary boost from a $1.5 trillion package of tax cuts passed by the Republican-controlled U.S. Congress and signed into law by President Donald Trump last month.

The lift from the fiscal stimulus, which includes a sharp reduction in the corporate income tax rate to 21 percent from 35 percent, is likely to be modest as the stimulus is occurring with the economy operating almost at capacity. There are also concerns the economy could overheat.

“With the tax cuts we get solid GDP growth in the near-term and then a fiscal hangover, which will likely put the economy at a greater risk of recession,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania.

NEAR FULL EMPLOYMENT

Data ranging from housing to manufacturing and consumer spending have suggested solid economic growth in the fourth quarter, despite a widening of the trade deficit in both October and November, which could subtract from gross domestic product.

In a separate report on Friday, the Commerce Department said the trade gap widened 3.2 percent in November to $50.5 billion, the highest level since January 2012.

The deficit was boosted by record high imports, which offset the highest exports in three years. The economy grew at a 3.2 percent annualized rate in the third quarter.

For all of 2017, the economy created 2.1 million jobs, below the 2.2 million added in 2016. Economists expect job growth to slow further this year as the labor market hits full employment, which will likely boost wage growth as employers compete for workers.

Economists are optimistic that annual wage growth will top 3.0 percent by the end of this year. The December employment report incorporated annual revisions to the seasonally adjusted household survey data going back five years.

There was no change in the unemployment rate, which declined by seven-tenths of a percentage point last year.

Economists believe the jobless rate could drop to 3.5 percent by the end of this year. That could potentially unleash a faster pace of wage growth and translate into a much stronger increase in inflation than currently anticipated.

That, according to economists, would force the Fed to push through four interest rate increases this year instead of the three it has penciled in. The U.S. central bank raised borrowing costs three times in 2017.

“If the unemployment rate declines and wages rise faster, which is likely, the Fed is going to start worrying about wage inflation,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

Employment gains were largely broad-based in December. Construction payrolls increased by 30,000 jobs, the most since February, reflecting recent strong increases in homebuilding. Manufacturing employment increased by 25,000 jobs.

Manufacturing is being supported by a strengthening global economy and a weakening dollar. Employment in the utilities sector fell for a second straight month.

General merchandise stores payrolls tumbled by 27,300 in December, with employment at clothing stores dropping by 3,800 jobs.

For all of 2017, retail employment dropped by 67,000 jobs after rising by 203,000 in 2016. Further job losses are likely this year as major retailers, facing stiff competition from online sellers like Amazon.com Inc <AMZN.O>, close stores.

Sears Holdings Corp said on Thursday it was shuttering 103 unprofitable Kmart and Sears stores. Macys Inc also announced 11 store closures, which could leave 5,000 workers unemployed.

(Reporting by Lucia Mutikani; Editing by Paul Simao)