Strong growth in US employment expected in September; rising wages

WASHINGTON (Reuters) – The US economy likely created jobs very quickly in September, with the unemployment rate likely falling to 3.8%, its lowest level in 18 years, signaling a further tightening of the economy. labor market.

The Ministry of Labor's monthly employment report on Friday should also show a steady rise in wages, suggesting moderate inflationary pressures, which could ease fears of overheating the economy and keep the Federal Reserve on a rising trajectory. progressive interest rates.

According to a survey conducted by Reuters with economists, nonfarm labor force numbers increased by 185,000 last month, following a rise of 201,000 in August. Projected employment gains for September are expected to be the monthly average of the last three months. The economy is expected to create about 120,000 jobs a month to keep pace with the growth of the working-age population.

"The labor market remains healthy and we believe that the scenario of decent economic growth with controlled inflation is expected to continue," said Aaron Anderson, head of research at Fisher Investments in San Francisco.

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 interest rates last week for the third time this year and removed in its press release the reference to monetary policy remaining "accommodative".

A robust labor market underpins the economy and, coupled with significant savings, could support consumer spending as the Trump administration's $ 1.5 trillion tax reduction plan wanes.

Economists were expecting a marginal impact on the wage bill from Hurricane Florence, which hit North Carolina and the South in mid-September. The storm, which caused massive flooding, hit the payroll at the end of the survey week.

"Despite billions of dollars of damage caused by Hurricane Florence, the storm should have a minimal impact on the payroll, with most workers being paid for at least part of the investigation period," said Sal Guatieri, senior economist at BMO Capital Markets in Toronto.

The government counts a person as having a job if they are paid for part of the pay period that includes the 12th of the month. But the hurricane could have reduced the work week and wages, as it has probably temporarily held back workers in the lower-cost restaurant and retail industries at home.

DIMINISHING SLACK

Average hourly earnings are expected to have risen 0.3% in September after a jump of 0.4% the previous month.

"Even though the effects of the storms will be limited by the fact that the hurricane struck relatively late in the investigation period, we believe that they will be sufficient to skew the workweek and increase revenues. hours, "said Lou Crandall, chief economist at Wrightson ICAP in Jersey. City, New Jersey.

With the increase in September being less than the 0.5% increase recorded in the same period last year, the annual wage increase would be reduced from 2.9% to 2.8% in August, which represents the largest increase in more than nine years.

Wage growth remains sufficient to keep inflation around the Fed's 2% target. Economists expect annual wage growth to reach 3%. The predicted 1.9% drop in the August unemployment rate, which drops from 3.9% in August, would bring it closer to the 3.7% forecast announced by the Fed by the end of the year.

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.

"Many great business leaders somehow think that this will be solved in one way or another and they are reluctant to make significant changes based on what they consider as an attitude and a trading strategy, "said Jason Thomas, chief economist at AssetMark. in Los Angeles.

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.

Payroll in the manufacturing sector probably rebounded in September after dropping in August for the first time in 13 months, due to lower employment in motor vehicle assembly plants. Construction companies are expected to have hired more workers last month after increasing 23,000 jobs in August.