U.S. unemployment rate falls to 3.5%; job growth steady

By Lucia Mutikani

WASHINGTON, (Reuters) – U.S. job growth increased moderately in September, with the unemployment rate dropping to near a 50-year low of 3.5%, assuaging financial market concerns that the slowing economy was on the brink of a recession amid lingering trade tensions.

The Labor Department’s closely watched monthly employment report on Friday, however, showed wage growth stagnating and manufacturing payrolls declining for the first time in six months. The retail sector also continued to shed jobs.

The report came on the heels of a string of weak economic reports, including a plunge in manufacturing activity to more than a 10-year low in September and a sharp slowdown in services industry growth to levels last seen in 2016, that heightened fears the economy was flirting with a recession.

With signs that the Trump administration’s 15-month trade war with China is spilling over to the broader economy, continued labor market strength is a critical buffer against an economic downturn. The trade war has eroded business confidence, sinking investment and manufacturing.

Nonfarm payrolls increased by 136,000 jobs last month, the government said. August data was revised to show 168,000 jobs created instead of the previously reported 130,000 positions.

The initial August job count was probably held back by a seasonal quirk related to students leaving their summer jobs and returning to school. Economists polled by Reuters had forecast payrolls would increase by 145,000 jobs in September.

U.S. stock index futures pared losses after the release of the data and later moved into positive territory. U.S. Treasury yields jumped and the dollar trimmed losses against the yen and euro. (Full Story)

Regardless of the continued moderate employment growth and sharp drop in the jobless rate, economists expect the Federal Reserve to cut interest rates at least one more time this year, given the trade policy uncertainty.

Washington announced this week tariffs on aircraft, other industrial products and agricultural products from the European Union as part of a World Trade Organization penalty award in a long-running aircraft subsidy case. Trade experts expect the EU will impose tariffs on U.S. goods next year over state subsidies for Boeing BA.N.

The U.S. central bank cut rates last month after reducing borrowing costs in July for the first time since 2008, to keep the longest economic expansion in history, now in its 11th year, on track. Growth estimates for the third quarter range from as low as a 1.3% annualized rate to as high as a 1.9% pace. The economy grew at a 2.0% pace in the second quarter, slowing from a 3.1% rate in the January-March period.

STRONG GOVERNMENT HIRING

Steady job growth last month came despite the Institute for Supply Management’s (ISM) measure of manufacturing employment tumbling to more than a 3-1/2-year low. In September, the ISM’s gauge of services industry employment fell to its lowest reading since February 2014.

While September’s job gains were below the monthly average of 161,000 this year, they were still above the roughly 100,000 needed each month to keep up with growth in the working-age population. The two-tenths of a percentage point drop in the unemployment rate from 3.7% in August pushed it to its lowest level since December 1969.

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, declined to 6.9%, the lowest level since December 2000, from 7.2% in August.

Despite the tight labor market, average hourly earnings were unchanged last month after advancing 0.4% in August. That lowered the annual increase in wages to 2.9% from 3.2% in August. The average workweek was unchanged at 34.4 hours.

Hiring is slowing across all sectors, with the exception of government, which is being boosted by state and local government recruitment.

Private payrolls increased by 114,000 jobs in September after rising by 122,000 in August. Manufacturing shed 2,000 jobs last month, the first decline in factory payrolls since March, after hiring 2,000 workers in August.

Factory employment growth has slowed from last year’s brisk pace. Manufacturing has ironically borne the brunt of the Trump administration’s trade war, which the White House has argued is intended to boost the sector.

Last month’s decline in manufacturing payrolls was led by the automotive sector, which lost 4,100 jobs. There were also job losses in machinery, fabricated metals products and primary metal industries.

Construction employment increased by 7,000 jobs last month after rising by 4,000 in August. Retail payrolls dropped by 11,400 jobs, shedding employment for an eight straight month.

Government employment increased by 22,000 jobs in September after surging by 46,000 in August. Hiring was boosted by state and local governments. Only 1,000 workers were hired last month for the 2020 Census. Government payrolls have increased by 147,000 over the year, driven by local governments.

((Reporting by Lucia Mutikani; Editing by Sandra Maler and Paul Simao))

U.S. hiring slows; shorter factory workweek a red flag

FILE PHOTO: An assembly line worker works on the production line at Renegade RV manufacturing plant in Bristol, Indiana, U.S., April 16, 2019. REUTERS/Tim Aeppel

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth slowed in July and manufacturers slashed hours for workers, which together with an escalation in trade tensions between the United States and China could give the Federal Reserve ammunition to cut interest rates again next month.

The Labor Department’s closely watched monthly employment report on Friday came a day after President Donald Trump announced an additional 10% tariff on $300 billion worth of Chinese imports starting Sept. 1, a move that led financial markets to fully price in a rate cut in September.

The U.S. central bank on Wednesday cut its short-term interest rate for the first time since 2008. Fed Chairman Jerome Powell described the widely anticipated 25-basis-point monetary policy easing as insurance against downside risks to the 10-year old economic expansion, the longest in history, from trade tensions and slowing global growth.

“Fed officials don’t exactly have mud in their eyes after cutting interest rates this week as job growth is slowing with the rest of the world,” said Chris Rupkey, chief economist at MUFG in New York. “We see nothing in today’s report to stop a second rate cut next month.”

Nonfarm payrolls increased by 164,000 jobs last month, the government said. The economy created 41,000 fewer jobs in May and June than previously reported. July’s job gains were in line with economists’ expectations.

Underscoring the moderation in hiring, the average workweek fell to its lowest level in nearly two years in July as manufacturers cut hours for workers. Hours were also reduced in other industries, contributing to the workweek’s drop to 34.3 hours, the fewest since September 2017, from 34.4 hours in June.

“The decline in hours worked suggests that employers may be pulling back more than headline hiring would suggest,” said Andrew Schneider, a U.S. economist at BNP Paribas in New York.

A measure of hours worked, which is a proxy for gross domestic product, fell 0.2% in July, pointing to weak output.

The U.S.-China trade war is taking a toll on manufacturing, with production declining for two straight quarters. Business investment has also been hit, contracting in the second quarter for the first time in more than three years and helping to hold back the economy to a 2.1% annualized growth rate. The economy grew at a 3.1% pace in the first quarter.

The White House’s “America First” policies are also restricting trade flows. A separate report from the Commerce Department on Friday showed sharp declines in both imports and exports in June, leading a 0.3% dip in the trade deficit to $55.2 billion during the month.

Job gains over the last three months averaged 140,000 per month, the fewest in nearly two years, compared to 223,000 in 2018. Economists say it is unclear whether the loss of momentum in hiring was due to ebbing demand for labor or a shortage of qualified workers.

Still, the pace of job gains remains well above the roughly 100,000 needed per month to keep up with growth in the working-age population. The unemployment rate was unchanged at 3.7% in July as 370,000 people entered the labor force.

Despite the lowest jobless rate in nearly 50 years, wage gains remain moderate, contributing to a tame inflation environment, which could be supportive of a rate cut at the Fed’s Sept. 17-18 policy meeting.

Inflation has undershot the central bank’s 2% target this year, rising 1.6% on a year-on-year basis in June after a 1.5% gain in May. Average hourly earnings rose 8 cents, or 0.3%, in July, after the same increase in June. That lifted the annual increase in wages to 3.2% in July from 3.1% in June.

Financial markets have fully priced in a rate cut in September and the chances for further easing in December have increased, according to CME Group’s FedWatch tool.

The dollar <.DXY> was trading lower against a basket of currencies, while U.S. Treasury prices rose. Stocks on Wall Street tumbled to a one-month low.

ECONOMY COOLING

Even with the step-down in employment growth and moderate wage gains, the labor market is supporting the economy as the stimulus from last year’s $1.5 trillion tax cut package fades. The economy is expected to grow around 2.5% this year.

There was some encouraging news on the jobs market. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to 63.0% in July from 62.9% in June.

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, fell two-tenths of a percentage point to 7.0% last month, the lowest level since December 2000.

The moderation in hiring was led by construction, which increased payrolls by 4,000 jobs after creating 18,000 positions in June.

Manufacturing employment rose by 16,000 jobs after advancing by 12,000 in June. The strong gains are at odds with weak factory activity. A survey on Thursday showed manufacturing employment hit its lowest level since November 2016 in July.

The sector, which accounts for more than 12% of the U.S. economy, is also battling an inventory bulge and design problems at aerospace giant Boeing Co <BA.N>. The manufacturing workweek dropped 0.3 hour to 40.4 hours, the lowest since November 2011. Factory overtime fell by 0.2 hour to 3.2 hours.

“A prolonged drop in hours worked signals that businesses may reduce hiring, with layoffs and cutbacks in private spending to potentially follow, said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings in New York.

Government employment increased by 16,000 jobs in July, boosted by local government hiring, adding to June’s gain of 14,000. Professional and business services employment rose by 38,000 jobs last month.

There were also increases in healthcare, leisure and hospitality, financial activities and wholesale trade employment. But retail payrolls dropped by 3,600 jobs, declining for a sixth straight month.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Graphic: America’s economy and wages are cooling but not its female workforce

A female construction worker stands outside a construction site in Manhattan, New York, U.S., October 3, 2018. REUTERS/Shannon Stapleton

By Jason Lange

WASHINGTON (Reuters) – Data released on Friday showed a return to strong job growth in the United States, allaying some fears the U.S. economy is on a short path to recession. But the data also reinforced the view that economic growth is slowing.

Here are five take-aways from a report by the U.S. Labor Department on U.S. employment during June.

SLOWING GROWTH

Every month the Labor Department surveys payrolls in the private sector to calculate how many hours employees across the nation worked. Seen as a proxy for economic growth, this index of the national work effort grew 0.2% in June, a rate near the muted gains clocked in recent months. That suggests the U.S. economy, which grew at a 3.1% annual rate in the first quarter of this year, could be cooling.

COOLER WAGE GROWTH?

Growth in private sector average hourly earnings accelerated throughout 2018 and through February of this year, when year-over-year growth hit the strongest rate since 2009 at 3.4%. June’s growth rate, however, was a more modest 3.1%. It is probably too early to tell if there has been a break in the upward trend.

Average earnings graphic

WAGE LAGGARDS

The manufacturing sector added 17,000 jobs in June after several months of weak growth or outright decline. Wage growth in the factory sector, however, has underperformed the national average. Wage growth has also been lower in the education and health jobs category tracked by the Labor Department.

leaders_laggards: https://tmsnrt.rs/2FUH8hw

LABOR FORCE INCREASE

A bright spot for the U.S. economy over the last few years has been the increase in the share of the population that either has a job or is looking for one. This so-called labor force participation rate ticked slightly higher in June, both for a key demographic of people of prime working age and for the general population. But the rate for prime-age workers has been mostly falling since January. This suggests the economy might be running lower on its supply of people available to work, which could depress future job growth.

participation rate graphic

WOMEN LEAD

In June, the participation rate fell for men of prime working age, while it rose for women. This is in line with the trend over the last few years. Indeed, the share of men who have jobs or are looking for one was slightly lower in June than it was in January 2017.

Women lead graphic 

(Reporting by Jason Lange; Editing by Dan Grebler)

Weak U.S. employment report casts pall over economy

FILE PHOTO: Brochures are displayed for job seekers at the Construction Careers Now! hiring event in Denver, Colorado U.S. August 2, 2017. REUTERS/Rick Wilking/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth slowed sharply in May and wages rose less than expected, raising fears that a loss of momentum in economic activity could be spreading to the labor market, which could put pressure on the Federal Reserve to cut interest rates this year.

The broad cool-off in hiring reported by the Labor Department on Friday was even before a recent escalation in trade tensions between the United States and two of its major trading partners, China and Mexico. Analysts have warned the trade fights could undermine the economy, which will celebrate 10 years of expansion next month, the longest on record.

Adding a sting to the closely watched employment report, the economy created far fewer jobs in March and April than previously reported.

The economy thus far has been largely resilient to the trade war with China. President Donald Trump in early May slapped additional tariffs of up to 25% on $200 billion of Chinese goods, which prompted retaliation by Beijing.

Last week, Trump said he would impose a tariff on all goods from Mexico in a bid to force authorities in that country to stop immigrants from Central America from crossing the border into the United States. Talks are ongoing to prevent the duties from kicking in at 5% on June 10.

Fed Chairman Jerome Powell said on Tuesday the central bank was closely monitoring the implications of the trade tensions on the economy and would “act as appropriate to sustain the expansion.”

“Today’s report makes a cut more likely, and supports our view that the trade tensions will ultimately slow growth enough for the Fed to respond in September and December with cuts,” said Joseph Song, an economist at Bank of America Merrill Lynch in New York.

Nonfarm payrolls increased by 75,000 jobs last month, the government said in its closely watched employment report, falling below the roughly 100,000 needed per month to keep up with growth in the working-age population.

Economists polled by Reuters had forecast payrolls rising by 185,000 jobs last month. Job growth in March and April was revised down by 75,000.

In the wake of the weak report financial markets priced in a rate cut as early as July and two more later this year. U.S. Treasury prices rallied, while the dollar dropped against a basket of currencies. Stocks on Wall Street were trading higher.

May’s disappointing job growth was flagged by a report on Wednesday from payrolls processing firm ADP showing the smallest gain in private payrolls in nine years last month. Another report this week showed a drop in online ads by businesses looking for help.

Last month’s slowdown in job gains, however, probably understates the health of the labor market as measures such as weekly applications for unemployment benefits and the Institute for Supply Management’s services employment gauge have suggested underlying strength.

WORKER SHORTAGES

Some of the weakness in hiring last month could be the result of worker shortages, especially in the construction, transportation and manufacturing sectors.

Monthly wage growth remained moderate in May, with average hourly earnings increasing six cents, or 0.2% following a similar gain in April. That lowered the annual increase in wages to 3.1% from 3.2% in April. The average workweek was unchanged at 34.4 hours last month.

The moderation in wage gains, if sustained, could cast doubts on the Fed’s optimism that inflation would return to the U.S. central bank’s 2% target.

The tepid employment report added to soft data on consumer spending, business investment, manufacturing and homes sales in suggesting the economy was losing momentum in the second quarter following a temporary boost from exports, inventory accumulation and defense spending. Growth is cooling as the massive stimulus from last year’s tax cuts and spending increases fades.

The Atlanta Fed is forecasting gross domestic product rising at a 1.5% annualized rate in the second quarter. The economy grew at a 3.1% pace in the first quarter.

The unemployment rate remained near a 50-year low of 3.6% in May. 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, dropped two-tenths of a percentage point to 7.1% last month, the lowest since December 2000.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, was unchanged at 62.8% last month.

Hiring slowed across all sectors in May. Manufacturing payrolls increased by 3,000 last month, after gaining 5,000 positions in April. The sector is struggling with an inventory overhang that has resulted in businesses placing fewer orders at factories.

Manufacturing payrolls will be watched closely for signs of any fallout from the trade tensions. Factory output has weakened and sentiment dropped to a 31-month low in May, with manufacturers worried mostly about trade.

Employers in the construction sector hired 4,000 workers in May after adding 30,000 jobs to payrolls in April. Leisure and hospitality sector payrolls increased by 26,000 jobs last month.

Professional and business services employment rose by 33,000. Transportation and warehousing payrolls fell as did retail employment. Government shed 15,000 jobs, the most since January 2018.

(Reporting by Lucia Mutikani, Editing by Andrea Ricci)

U.S. job growth surges; unemployment rate drops to 3.6 percent

FILE PHOTO: Job seekers and recruiters gather at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida -/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth surged in April and the unemployment rate dropped to a more than 49-year low of 3.6 percent, pointing to sustained strength in economic activity even as last year’s massive fiscal stimulus fades.

The Labor Department’s closely watched monthly employment report on Friday, however, showed steady wage gains last month, consistent with moderate inflation. The decline in the unemployment rate to the lowest level since December 1969 was because people left the labor force, suggesting some slack in the jobs market remains.

The report was broadly supportive of the Federal Reserve’s decision on Wednesday to keep interest rates unchanged and signal little desire to adjust monetary policy anytime soon. Fed Chair Jerome Powell described the economy and job growth as “a bit stronger than we anticipated” and inflation “somewhat weaker.”

“Employment gains are strong enough to dispel any immediate concerns over the health of the economy, while wage gains are not strong enough to force the Federal Reserve&rsquo;s hand to tighten the policy stance,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.

Nonfarm payrolls increased by 263,000 jobs last month, amid gains in hiring nearly across all sectors. The economy created 16,000 more jobs in February and March than previously reported. Economists polled by Reuters had forecast nonfarm payrolls rising by 185,000 jobs last month.

The strong economy, especially the labor market, could boost President Donald Trump’s re-election hopes next year. Trump has touted the economy as being one of the big wins of his first term in office. The economy will celebrate 10 years of expansion in July, the longest on record.

Job growth is well above the roughly 100,000 needed per month to keep up with growth in the working-age population.

The second month of strong job growth was further evidence that February’s paltry 56,000 increase in jobs was an aberration.

It also effectively put to rest concerns about a recession and diminished expectations of an interest rate cut this year that had been fanned by a brief inversion of the U.S. Treasury yield curve in March.

Hiring remains strong, despite anecdotal evidence of worker shortages in the transportation, manufacturing and construction industries, suggesting there is still some spare capacity in the labor market.

Steadily rising wages have on balance been keeping workers in the labor force and drawing back those who had dropped out. Average hourly earnings rose six cents, or 0.2 percent in April after rising by the same margin in March. That kept the annual increase in wages at 3.2 percent. Workers put in fewer hours in April. The average workweek fell to 34.4 hours from 34.5 hours.

Though wage growth is not strong enough to drive up inflation, it is seen as sufficient to underpin economic growth as the stimulus from last year’s $1.5 trillion tax cut wanes.

The economy grew at a 3.2 percent annualized rate in the first quarter, driven by a surge in exports and inventories, quickening from the October-December period’s 2.2 percent pace.

The dollar dipped versus a basket of currencies after the employment report, while U.S. Treasury yields were marginally lower.

PEOPLE LEFT LABOR FORCE

The two-tenths of a percentage point drop in the unemployment rate from 3.8 percent in March was because 490,000 people left the labor force in April. The jobless rate is now below the 3.7 percent that Fed officials project it will be by the end of the 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 7.3 percent in April.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 62.8 percent in April from 63.0 percent in March. The participation rate hit a more than five-year high of 63.2 percent in January.

Some economists expect job growth to slow this year as fewer workers become available, which will push up wages and lift inflation back to the Fed’s 2 percent target. An inflation measure tracked by the U.S. central bank increased 1.6 percent in the year to March, the smallest gain in 14 months, from 1.7 percent in February.

Employment at construction sites increased by 33,000 jobs in April, rising for a second straight month. Manufacturing sector payrolls rebounded by 4,000 jobs after being unchanged in March.

The industry is being pressured by layoffs in the automobile sector as assembly plants try to cope with declining sales and an inventory overhang.

Leisure and hospitality sector payrolls increased by 34,000 jobs last month. Professional and business services employment added 76,000 jobs last month. There were increases in healthcare, transportation and warehousing employment, as well as financial activities.

But retail payrolls fell by 12,000 jobs in April, declining for a third straight month. Temporary help, a harbinger for future hiring, rebounded last month after dropping in March.

Government payrolls increased by 27,000 in April, likely driven by early hiring for the 2020 Census.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. firms hire 275,000 workers in April, most nine months: ADP

People attend the Executive Branch Job Fair hosted by the Conservative Partnership Institute at the Dirksen Senate Office Building in Washington, U.S., June 15, 2018. REUTERS/Toya Sarno Jordan

(Reuters) – U.S. private employers added 275,000 jobs in April, well above economists’ expectations and the most since last July, supporting the view of a solid domestic labor market, a report by a payrolls processor showed on Wednesday.

April’s robust figure might be overstating the strength of the jobs sector due to technical factors, said Mark Zandi, chief economist at Moody’s Analytics which jointly developed the employment report with ADP.

Job growth last month was likely in the 175,000 to 200,000 range, which is the current consensus range among economists, Zandi said on a conference call with reporters.

Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 180,000 jobs, with estimates ranging from 141,000 to 225,000.

Private payroll gains in the month earlier were revised up to 151,000 from an originally reported 129,000 increase.

While the overall labor market is “fine,” it is slowing, Zandi said.

The ADP figures come ahead of the U.S. Labor Department’s more comprehensive non-farm payrolls report at 8:30 a.m. (1230 GMT) on Friday, which includes both public and private-sector employment.

Economists polled by Reuters are looking for U.S. private payroll employment to have grown by 180,000 jobs in April, down from 182,000 the month before. Total non-farm employment is expected to have changed by 185,000.

The unemployment rate is forecast to stay steady at the 3.8 percent recorded a month earlier.

GRAPHIC: ADP vs. the U.S. Labor Department payrolls data – http://tmsnrt.rs/2eRF4KM

(Reporting by Richard Leong and Dan Burns; Editing by Chizu Nomiyama)

U.S. job openings hit 11-month low; quits rate stagnates

FILE PHOTO: A "Help Wanted" sign sits in the window of a shop in Harvard Square in Cambridge, Massachusetts, U.S., February 11, 2019. REUTERS/Brian Snyder/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job openings dropped to an 11-month low in February and hiring decreased, which could partially explain a sharp slowdown in job growth during that month.

Still, the labor market remains a pillar of support for the economy amid signs that activity was easing because of the fading boost from a $1.5 trillion tax cut package and the effects of interest rate increases over the last few years. The economy is also facing headwinds from slowing global growth and the United States’ trade war with China.

“The February job openings data reinforced that the labor market weakened in February but there isn’t any cause for concern,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

Job openings, a measure of labor demand, tumbled by 538,000 to a seasonally adjusted 7.1 million, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS, report on Tuesday. The drop was the biggest since August 2015. The level was the lowest since March 2018.

Vacancies in the accommodation and food services industry fell by 103,000 jobs in February. There were 72,000 fewer job openings in the real estate and rental and leasing sector. Job openings in the transportation, warehousing and utility sector dropped by 66,000.

Nonfarm payrolls increased by only 33,000 jobs in February, the fewest since September 2017. The near-stall in job gains was partially blamed on colder weather and also viewed as payback after robust increases in December and January.

Job growth picked up in March, with the economy creating 196,000 positions, the government reported last Friday.

WORKERS STILL SCARCE

The drop in job openings in February likely does not change the theme of labor shortages in the economy. A survey of small businesses published on Tuesday found that just over a fifth of owners reported difficulties finding qualified workers as their “single most important business problem” in March.

According to the survey from the NFIB, 39 percent of small business owners reported job openings they could not fill in March. Thirty-three percent said they had openings for skilled workers and 14 percent have vacancies for unskilled labor.

Economists expect monthly job growth to average roughly 150,000 this year, stepping down from 223,000 in 2018.

“There are still millions of help wanted signs out there in the country so we hesitate to revise our outlook for the labor market overall,” said Chris Rupkey, chief economist at MUFG in New York.

The dive in job openings in February pushed down the vacancies rate to 4.5 percent from 4.8 percent in January. Hiring fell to 5.7 million in February from 5.8 million in the prior month. The decrease in hiring was led by the construction sector, where hiring fell by 73,000.

Hiring in the nondurable goods manufacturing industry dropped by 33,000 in February. Hiring by state and local government education departments fell 22,000.

The number of workers voluntarily quitting their jobs was little changed at 3.5 million in February, keeping the quits rate at 2.3 percent for a ninth straight month.

The quits rate is viewed by policymakers and economists as a measure of job market confidence. The worker reluctance to switch jobs is despite the tight labor market conditions that are steadily driving up wages.

“This is not as many quits as you would expect in such a tight labor market, when workers are in higher demand,” said Nick Bunker, an economist at Indeed Hiring Lab. “Though perhaps this isn’t surprising in the short term given that the ratio of unemployed workers to job openings has been rising.”

Layoffs increased in February, lifting the layoffs rate to 1.2 percent from 1.1 percent in January. There were increases in layoffs in the professional and businesses services, and healthcare and social assistance sectors in February.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. weekly jobless claims unexpectedly fall

FILE PHOTO: A man looks over employment opportunities at a jobs center in San Francisco, California, in this February 4, 2010 file photo. REUTERS/Robert Galbraith/Files

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits unexpectedly fell last week, suggesting labor market conditions remained solid, despite slowing job growth.

Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 211,000 for the week ended March 23, the Labor Department said on Thursday. Data for the prior week was revised to show 5,000 fewer applications received than previously reported.

Economists polled by Reuters had forecast claims rising to 225,000 in the latest week. The Labor Department said no states were estimated. The government revised the claims data and the so-called seasonal factors from 2014 through 2018. It also updated the seasonal factor for 2019.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 3,250 to 217,250 last week.

Job growth has slowed after last year’s robust gain. The pace, however, remains more than enough to keep up with growth in the working age population. The unemployment rate is currently at 3.8 percent. The moderation in job growth also reflecting a shortage of workers and softening economic growth as the stimulus from a $1.5 trillion tax cut package fades.

Thursday’s claims report showed the number of people receiving benefits after an initial week of aid rose 13,000 to 1.76 million for the week ended March 16. The four-week moving average of the so-called continuing claims fell 4,250 to 1.75 million.

The continuing claims data covered the survey week for March’s unemployment rate. The four-week average of continuing claims rose slightly between the February and March survey periods, suggesting little change in the unemployment rate.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. job growth jumps; annual wage gain largest since 2009

People wait in line at a stand during the Executive Branch Job Fair hosted by the Conservative Partnership Institute at the Dirksen Senate Office Building in Washington, U.S., June 15, 2018. REUTERS/Toya Sarno Jordan

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years, pointing to further labor market tightening that could encourage the Federal Reserve to raise interest rates again in December.

The Labor Department’s closely watched monthly employment report on Friday also showed the unemployment rate steady at a 49-year low of 3.7 percent as 711,000 people entered the labor force, in a sign of confidence in the jobs market.

Sustained labor market strength could ease fears about the economy’s health following weak housing data and stalling business spending. President Donald Trump cheered the robust report, which came less than a week before the midterm elections that will decide who controls the U.S. Congress.

“These are incredible numbers,” Trump tweeted.

Nonfarm payrolls increased by 250,000 jobs last month as employment in the leisure and hospitality sector bounced back after being held down by Hurricane Florence, which drenched North and South Carolina in mid-September.

There were also big gains in manufacturing, construction and professional and business services payrolls. Data for September was revised to show 118,000 jobs added instead of the previously reported 134,000.

Economists polled by Reuters had forecast payrolls increasing by 190,000 jobs in October and the unemployment rate unchanged at 3.7 percent. The Labor Department said Hurricane Michael, which struck the Florida Panhandle in mid-October, “had no discernible effect on the national employment and unemployment estimates for October.”

Average hourly earnings rose five cents, or 0.2 percent, in October after advancing 0.3 percent in September. That boosted the annual increase in wages to 3.1 percent, the biggest gain since April 2009, from 2.8 percent in September.

Employers also increased hours for workers last month. The average workweek increased to 34.5 hours from 34.4 hours in September.

“The report shows a booming U.S. economy with a sufficient whiff of wage inflation to keep the Fed on track to raise rates in December and at least twice next year,” said David Kelly, chief global strategist at JPMorgan Funds in New York.

Strong annual wage growth mirrors other data published this week showing wages and salaries rising in the third quarter by the most since mid-2008. Hourly compensation also increased at a brisk pace in the third quarter.

Firming wages support views that inflation will hover around the Fed’s 2.0 percent target for a while. The personal consumption expenditures price index excluding the volatile food and energy components, which is the Fed’s preferred inflation measure, has increased by 2.0 percent for five straight months.

The Fed is not expected to raise rates at its policy meeting next week, but economists believe October’s strong labor market data could see the U.S. central bank signal an increase in December. The Fed raised borrowing costs in September for the third time this year.

U.S. stocks were trading mostly lower and the dollar was slightly weaker against a basket of currencies on Friday. Prices of U.S. Treasuries were lower.

WORKER SHORTAGE

Employers, scrambling to find qualified workers, are boosting wages. There are a record 7.14 million open jobs.

Online retail giant Amazon.com Inc announced last month that it would raise its minimum wage to $15 per hour for U.S. employees starting in November. Workers at United States Steel Corp are set to receive a hefty pay rise also.

Employment gains have averaged 218,000 jobs per month over the past three months, double the roughly 100,000 needed to keep up with growth in the working-age population.

That is seen supporting the economy through at least early 2019 when gross domestic product is expected to significantly slow as the stimulus from the White House’s $1.5 trillion tax cut package fades.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, increased two-tenths of a percentage point to 62.9 percent last month.

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, fell to 7.4 percent last month from 7.5 percent in September. The employment-to-population ratio rose two-tenths of percentage point to 60.6 percent, the highest since January 2009.

Last month, employment in the leisure and hospitality sector increased by 42,000 jobs after being unchanged in September. Retail payrolls rose by only 2,400, likely restrained by layoffs related to Steinhoff’s Mattress Firm bankruptcy as well as some store closures by Sears Holdings Corp.

Construction companies hired 30,000 more workers in October. Jobs in the sector have been increasing despite weakness in the housing market. Government payrolls rose by 4,000 jobs in October.

Manufacturing employment increased by 32,000 jobs in October after adding 18,000 positions in September. Job gains in the sector, which accounts for about 12 percent of the U.S. economy, could slow after a survey on Thursday showed a measure of factory employment fell in October.

So far, manufacturing hiring does not appear to have been affected by the Trump administration’s protectionist trade policy, which has contributed to capacity constraints at factories. The United States is locked in a bitter trade war with China as well as tit-for-tat tariffs with other trade partners, including the European Union, Canada and Mexico.

Despite the protectionist measures, the trade deficit continues to deteriorate. In a separate report on Friday, the Commerce Department said the trade gap increased 1.3 percent to $54.0 billion in September, widening for a fourth straight month.

(Reporting by Lucia Mutikani; Editing by Clive McKeef and Paul Simao)

U.S. job growth slows in July, unemployment rate dips

FILE PHOTO: People wait in line to attend TechFair LA, a technology job fair, in Los Angeles, California, U.S., January 26, 2017. REUTERS/Lucy Nicholson

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth slowed more than expected in July as employment in the transportation and utilities sectors fell, but a drop in the unemployment rate suggested that the labor market was tightening.

Nonfarm payrolls increased by 157,000 jobs last month, the Labor Department said on Friday. The economy created 59,000 more jobs in May and June than previously reported and needs to generate about 120,000 jobs per month to keep up with growth in the working-age population.

The unemployment rate fell one-tenth of a percentage point to 3.9 percent in July, even as more people entered the labor force in a sign of confidence in their job prospects. The low unemployment rate could allow the Federal Reserve to raise interest rates again in September.

The jobless rate had risen in June from an 18-year low of 3.8 percent in May. Economists polled by Reuters had forecast nonfarm payrolls increasing by 190,000 jobs last month and the unemployment rate falling to 3.9 percent.

The slowdown in hiring last month likely is not the result of trade tensions, which have escalated in recent days, but rather because of a shortage of workers. There are about 6.6 million unfilled jobs in the nation. A survey of small businesses published on Thursday showed a record number in July of establishments reporting that they could not find workers.

According to the NFIB, the vacancies were concentrated in construction, manufacturing and wholesale trade industries. Small businesses said they were also struggling to fill positions that did not require skilled labor.

The Fed’s Beige Book report last month showed a scarcity of labor across a wide range of occupations, including highly skilled engineers, specialized construction and manufacturing workers, information technology professionals and truck drivers.

The shortage of workers is steadily pushing up wages.

Average hourly earnings increased seven cents, or 0.3 percent, in July after gaining 0.1 percent in June. The annual increase in wages was unchanged at 2.7 percent in July.

U.S. stock market futures dipped after the data while the dollar &lt;.DXY&gt; fell against a basket of currencies. Prices of U.S. Treasuries were slightly higher.

TRADE TENSIONS

President Donald Trump’s administration has imposed duties on steel and aluminum imports, provoking retaliation by the United States’ trade partners, including China, Canada, Mexico and the European Union. It has also slapped 25 percent tariffs on $34 billion worth of Chinese imports.

Beijing has fought back by slapping tariffs on U.S. exports to China. On Friday, China’s Commerce Ministry said a new set of proposed import tariffs on $60 billion worth of U.S. goods are rational and restrained and warned that it reserves the right of further countermeasures in the intensifying trade war.

On Wednesday, Trump proposed a higher 25 percent tariff on $200 billion worth of Chinese imports.

Economists have warned that the tit-for-tat import duties, which have unsettled financial markets, could undercut manufacturing through disruptions to the supply chain and put a brake on the strong economic growth.

There have also been concerns that the trade tensions could dampen business confidence and lead companies to shelve spending and hiring plans. But a $1.5 trillion fiscal stimulus, which helped to power the economy to a 4.1 percent annualized growth pace in the second quarter, is assisting the United States in navigating the stormy trade waters.

The Fed left interest rates unchanged on Wednesday while painting an upbeat portrait of both the labor market and economy. The U.S. central bank said “the labor market has continued to strengthen and economic activity has been rising at a strong rate.” It increased borrowing costs in June for the second time this year.

The moderation in employment gains and steady wage growth could ease concerns about the economy overheating, and keep the Fed on a gradual path of monetary policy tightening.

The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding the volatile food and energy components, increased 1.9 percent in June. The core PCE hit the central bank’s 2 percent inflation target in March for the first time since December 2011.

Manufacturing payrolls rose by 37,000 jobs last month after increasing by 33,000 in June. Construction companies hired 19,000 more workers after increasing payrolls by 13,000 jobs in June. Retail payrolls rebounded by 7,100 jobs last month after losing 20,200 in June.

Education and health services added 22,000 jobs last month, the fewest since October 2017, after boosting payrolls by 69,000 jobs in June. July’s slowdown in hiring reflected a loss of 10,800 education services jobs.

Transportation payrolls dropped by 1,300 jobs last month, with transit and ground transportation employment declining by 14,800 jobs. Utilities employment fell for a third straight month and the finance and insurance industry shed 9,400 jobs last month.

Government employment fell by 13,000 jobs in July.

(Reporting by Lucia Mutikani; Editing by Jonathan Oatis and Paul Simao)