U.S. employment growth, wages seen
picking up in October
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[November 04, 2016]
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. employers
likely stepped up hiring in October and boosted wages for workers, which
could effectively seal the case for a December interest rate increase
from the Federal Reserve.
Nonfarm payrolls likely increased by 175,000 jobs last month after
rising 156,000 in September, according to a Reuters survey of
economists. The unemployment rate is forecast falling one-tenth of a
percentage point to 4.9 percent.
"The expected payroll gains should easily meet the Fed's criteria of
some further progress in the labor market, which leaves us with a rate
hike in December," said Harm Bandholz, chief U.S. economist at UniCredit
Research in New York.
The Labor Department will release its closely watched employment report
on Friday at 8:30 a.m., four days before the Nov. 8 presidential
election.
The report will come on the heels of data last week showing an
acceleration in economic growth in the third quarter. But economists see
little impact from the report on an increasingly bitter and divisive
campaign.
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"There is so much noise out there right now, everyone is screaming from
the rooftops. I just don't know that any particular data point is going
to have a great bearing on the election, in and of itself," said Sam
Bullard, senior economist at Wells Fargo Securities in Charlotte, North
Carolina.
Though the U.S. central bank is expected to increase borrowing costs
next month, that decision will likely depend on the outcome of Tuesday's
election. The tight race between Democratic candidate Hillary Clinton
and her Republican rival Donald Trump has rattled financial markets.
The Fed on Wednesday left interest rates unchanged but said its monetary
policy-setting committee "judges that the case for an increase in the
federal funds rate has continued to strengthen." It lifted its benchmark
overnight interest rate last December for the first time in nearly a
decade.
"The election could still derail the Fed's plans, particularly if a very
close result led to one or both candidates contesting it via the
courts," said Paul Ashworth, chief economist at Capital Economics in
Toronto.
TREND HAS SLOWED
Despite October's anticipated pick-up in job gains, the trend in
employment growth has slowed as the labor market nears full employment
and the economy's recovery from the 2007-09 recession shows signs of
aging.
Employment growth so far this year has averaged 178,000 jobs per month,
down from an average gain of 229,000 per month in 2015. Still, the
monthly job gains are more than enough to absorb new entrants into the
labor market.
Fed Chair Janet Yellen has said the economy needs to create just under
100,000 jobs a month to keep up with growth in the work-age population.
The prospects of an interest rate hike next month could also be
bolstered by an anticipated solid rise in wages. Average hourly earnings
are expected to have increased 0.3 percent in October after advancing
0.2 percent in September.
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![](../images/110416pics/news_o29.jpg)
People wait in line to enter the Nassau County Mega Job Fair at
Nassau Veterans Memorial Coliseum in Uniondale, New York, U.S.
October 7, 2014. REUTERS/Shannon Stapleton/File Photo
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The lift from a calendar quirk could push the year-on-year increase
to 2.7 percent from 2.6 percent in September. The Fed on Wednesday
struck a fairly upbeat note on inflation, saying price pressures had
"increased somewhat since earlier this year."
Despite the labor market nearing full employment, wage growth has
remained moderate. Economists blame this on a low labor force
participation rate.
The participation rate, or the share of working-age Americans who
are employed or at least looking for a job, is hovering near
multi-decade lows, in part reflecting demographic changes.
A solid payrolls gain accompanied by a pick-up in wages could
support consumer spending heading into the holiday season, and in
turn keep the economy on a relatively higher growth path.
Economists expect a marginal impact on job growth from hurricane
Matthew, which lashed the southeast of the country last month,
causing extensive flooding. However, the storm could have reduced
the average workweek in October.
Payrolls could get a boost from early holiday season hiring.
"With labor markets tight, companies have started earlier each year
to secure scarce temporary workers for the upcoming holiday season,"
said Michelle Girard, chief economist at RBS in Stamford,
Connecticut.
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"If done earlier than the seasonal factors expect, this seasonal
hiring could bias the numbers higher."
Manufacturing employment likely fell for a third straight month in
October, while construction payrolls probably rose for a second
consecutive month.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
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