Employment growth in the United States is cooling; the unemployment rate drops to 3.7%

WASHINGTON (Reuters) – Employment growth in the United States slowed sharply in September, probably as a result of hurricane Florence, which weighed on restaurant and retailer wages, but the unemployment rate fell to 3.7%, its lowest level in 49 years, suggesting further tightening of the labor market.

The Department of Labor's monthly employment report released on Friday also showed a steady rise in wages suggesting moderate inflationary pressures, which could ease fears of overheating the economy and keep the Federal Reserve on a gradual rise path interest rates.

The non-farm payroll rose by 134,000 jobs last month, the lowest number in a year, due to the loss of jobs in the retail, recreation and entertainment sectors. ;hotel. Data for July and August have been revised to indicate that 87,000 additional jobs were created compared to previous ones.

The economy is expected to create about 120,000 jobs a month to keep pace with the growth of the working-age population.

"The smaller increase in the payroll recorded in September may in part be a result of Hurricane Florence," said Michael Pearce, US economist at Capital Economics in New York. "There is little in this report that prevents the Fed from continuing to raise interest rates gradually."

Economists polled by Reuters forecast an increase of 185,000 jobs in September and a drop in the unemployment rate from one-tenth of a point to 3.8%.

Fed Chairman Jerome Powell said on Tuesday that the economic outlook was "remarkably positive" and that he thought he was at the dawn of a "historically rare" period characterized by a extremely low unemployment and controlled inflation.

The US central bank raised rates last week for the third time this year and removed in its press release the reference to monetary policy remains "accommodative".

The Ministry of Labor said that it was possible that Hurricane Florence, which hit North and South Carolina in mid-September, could have affected employment in some industries. It was said that it was impossible to quantify the net effect on employment.

The payroll is computed from an employer survey, which considers any worker who has not been paid for part of the pay period including the 12th of the month as being unemployed. The average work week remained unchanged at 34.5 hours in September.

The smallest household survey from which the unemployment rate is derived considers people as having a job, whether or not they missed work during the reference week, and that as a result, they have not been paid. He showed that 299,000 people reported staying home last month because of bad weather, compared to an average of 85,000 in September.

The weakness of the workforce last month is not corroborated by any other data on the labor market. A survey by the Institute for Supply Management published this week showed a sharp increase in employment in the services sector in September.

Economists also noted that the initial estimate of September payroll growth tended to be revised upward.

US Treasury prices fell, with the 30-year bond yield reaching its highest level in four years. The .DXY dollar was little changed relative to a basket of currencies, while Wall Street shares traded lower.

DIMINISHING SLACK

The 2.9% drop in the unemployment rate of 2.9% in August brought the unemployment rate back to December 1969 and corresponded to the Fed's 3.7% forecast at the end of this year.

Average hourly earnings increased 0.3% in September after a similar increase in August. The annual wage increase fell from 2.9% in August to 2.8% in August, the largest increase in more than nine years.

Wage growth remains sufficient to keep inflation around the Fed's 2% target.

Some economists believe that wage growth may be underestimated given the anecdotal evidence that labor shortages resulting from the tight labor market are forcing firms to increase benefits. Amazon.com Inc (online retail giant)AMZN.Oannounced this week that it would increase its minimum wage to $ 15 an hour for US employees starting in November.

"Companies of all sizes are saying that they are doing everything they can to keep their workers," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. "Standard measures simply do not reflect these increases, if at all."

Last month, jobs in the leisure and hospitality sector fell by 17,000, the first drop since September 2017, while payroll in bars and restaurants dropped by 18,200. Payroll in retail trade fell by 20,000 jobs in September, due to the widespread decline across the sector.

Payroll in the manufacturing sector increased by 18,000 in September, after increasing by 5,000 in August. Construction companies hired 23,000 more workers last month after an increase of 26,000 jobs in August.

Employment in professional and business services increased by 54,000 last month and government staff increased by 13,000.

Surveys have shown that manufacturers are increasingly concerned about the intensification of the US-China trade war, but this does not appear to have had a negative impact on recruitment. In fact, the Fed's latest national economic survey reflected concerns about labor shortages affecting both unskilled jobs and tariffs.

Last month, Washington imposed tariffs on Chinese goods worth $ 200 billion, while Beijing reacted against duties on US goods worth $ 60 billion. The United States and China had already imposed tariffs on goods worth $ 50 billion. The trilateral trade agreement between the United States, Canada and Mexico was saved Sunday in an 11-hour deal.

Despite the protectionist trade policy of the Trump administration, the trade deficit continues to deteriorate. The trade deficit rose 6.4 percent to reach a six-month high of $ 53.2 billion in August, the Commerce Department said Friday.

The trade deficit of politically sensitive goods with China rose 4.7% to a record $ 38.6 billion.

"Import growth will likely remain strong in the coming quarters as long as domestic demand remains buoyant," said Jay Bryson, global economist at Wells Fargo Securities in Charlotte, North Carolina.