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US hiring up, wage growth strongest since 2009
February 03, 2018
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WASHINGTON: US job growth surged in January and wages increased further, recording their largest annual gain in more than 8-1/2 years, bolstering expectations that inflation will push higher this year as the labour market hits full employment.

Nonfarm payrolls jumped by 200,000 jobs last month after rising 160,000 in December, the Labor Department said on Friday.

The unemployment rate was unchanged at a 17-year low of 4.1 per cent. Average hourly earnings rose 0.3 per cent in January to $26.74, building on December’s solid 0.4 per cent gain.

That boosted the year-on-year increase in average hourly earnings to 2.9 per cent, the largest rise since June 2009, from 2.7 per cent in December. Workers, however, put in fewer hours last month. The average workweek fell to 34.3 hours, the shortest in four months, from 34.5 hours in December.

The robust employment report underscored the strong momentum in the economy, raising the possibility that the Federal Reserve could be a bit more aggressive in raising interest rates this year. The US central bank has forecast three rate increases this year after raising borrowing costs three times in 2017.

US financial markets have priced in a rate hike in March. The dollar rose against a basket of currencies on the data. Prices for US Treasuries fell, with the yield on the benchmark 10-year note rising to a four-year high. Stocks on Wall Street were trading lower.

The unemployment rate dropped seven-tenths of a percentage point in 2017 and economists expect it to hit 3.5 per cent by the end of the year. Economists say job gains are being driven by buoyant domestic and global demand.

Given that the labour market is almost at full employment, economists saw little boost to job growth from the Trump administration’s $1.5 billion tax cut package passed by the US Congress in December.

President Donald Trump and his fellow Republicans have cast the fiscal stimulus, which includes a reduction in the corporate income tax rate to 21 per cent from 35 per cent, as creating jobs and boosting economic growth.

According to outplacement consultancy firm Challenger, Gray & Christmas, only seven companies, including Apple, had announced plans to add roughly a combined 37,000 new jobs in response to the tax cuts as of the end of January.

Economists polled by Reuters had forecast nonfarm payrolls rising by 180,000 jobs last month and the unemployment rate unchanged at 4.1 per cent. January’s jobs gains were above the monthly average of 192,000 over the past three months.

Reuters

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