U.S. job growth seen picking up,
unemployment rate falling
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[September 07, 2018]
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth
likely accelerated in August, with the unemployment rate expected to
have fallen back to an 18-year low of 3.8 percent, which would bolster
views that the economy was so far weathering the Trump administration's
escalating trade war with China.
Nonfarm payrolls probably rose by 191,000 jobs last month after gaining
157,000 in July, according to a Reuters survey of economists. The Labor
Department will publish its closely watched employment report on Friday
at 8:30 a.m. EDT (1230 GMT).
Analysts said the administration's $1.5 trillion tax cut package and
increased government spending were shielding the economy from the trade
tensions, which have also seen Washington engaged in tit-for-tat tariffs
with other trade partners, including the European Union, Canada and
They also noted that the import duties implemented so far have affected
only a small portion of the American economy, but warned this could
change if President Donald Trump pressed ahead with additional tariffs
on Chinese imports.
"The economy is on an adrenalin rush," said Ryan Sweet, senior economist
at Moody's Analytics in Westchester, Pennsylvania. "Given the amount of
fiscal stimulus that the economy is benefiting from, it's going to take
a lot to get it off that high."
The United States and China have slapped retaliatory tariffs on a
combined $100 billion of products since early July.
Americans had until Thursday to comment on a list of $200 billion worth
of Chinese goods widely expected to be hit with tariffs soon. The
government imposed import duties on goods including steel, aluminum,
washing machines, lumber and solar panels early this year to protect
American industries from what Trump says is unfair foreign competition.
Global outplacement firm Challenger, Gray & Christmas said on Thursday
there were 521 tariff-related job cuts in August, but these were largely
offset by the hiring of 359 workers by steel producers.
August job growth could, however, fall short of expectations because of
a seasonal quirk. Over the past several years, the initial August job
count has tended to exhibit a weak bias, with revisions subsequently
"This August weakness has also tended to occur in many of the same
industries, including manufacturing, professional services, retail, and
information, and we estimate that residual seasonality could weigh on
headline payroll growth in tomorrow's report by 40,000 or even more,"
said Spencer Hill, an economist at Goldman Sachs in New York.
U.S. unemployment rate is near the lowest in 18 years.
MODERATE WAGE GROWTH
Nevertheless, the anticipated one-tenth of a percentage point drop in
the unemployment rate from 3.9 percent in July should underscore
tightening labor market conditions and cement expectations for a third
interest rate increase from the Federal Reserve this year when
policymakers meet on Sept. 25-26.
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A man holds his briefcase while waiting in line during a job fair in
Melville, New York July 19, 2012. REUTERS/Shannon Stapleton
"Another encouraging labor market performance should instill greater
confidence that gradual interest rate increases are still the most
appropriate course of policy action for the foreseeable future,"
said Sam Bullard, a senior economist at Wells Fargo Securities in
Charlotte, North Carolina.
The employment report would add to manufacturing and services
industries surveys in suggesting the Trump administration's
protectionist trade policy was having a marginal impact on the
economy for now. The economy grew at a 4.2 percent annualized rate
in the second quarter, almost double the 2.2 percent pace set in the
For now the vibrant labor market is not generating wage inflation,
which likely reduces the prospect of the economy overheating.
Average hourly earnings are forecast increasing 0.2 percent in
August after rising 0.3 percent in July.
That would keep the annual increase in wages at 2.7 percent in
August. Annual wage growth has remained below 3 percent since
mid-2009. Moderate wage gains have been blamed on low productivity
growth and are also seen as an indication that there is still some
slack in the labor market.
"We do, however, expect it to reach a new high of 2.9 percent by the
fourth quarter," said Lou Crandall, chief economist at Wrightson
ICAP in Jersey City.
Job gains in August were likely across all sectors. Manufacturing
payrolls are forecast rising by 24,000 jobs after increasing by
37,000 jobs in July. Construction companies probably added to the
19,000 workers hired in July.
Employment at sporting goods, hobby, book and music stores is
expected to have rebounded in August after shedding 31,800 jobs in
July related to the closing of all Toys-R-Us stores. Government
employment likely increased by 1,000 jobs in August.
(Reporting by Lucia Mutikani; Editing by Dan Burns and Tom Brown)
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