Sun, Aug 07, 2016 - Page 16 News List

US jobs report boosts economic outlook

FIGURES REVISED:Oxford Economics said the ‘combination of strong employment and firming wage growth’ should keep supporting income and consumer spending

Reuters, WASHINGTON

US employment rose more than expected for the second month in a row last month and wages picked up, bolstering expectations of faster economic growth and raising the probability of a US Federal Reserve interest rate increase this year.

Nonfarm payrolls rose by 255,000 jobs after an upwardly revised 292,000 surge in June, with hiring broadly based across the sectors of the economy, the US Department of Labor said on Friday.

In addition, 18,000 more jobs were created in May and June than previously reported.

The unemployment rate was unchanged at 4.9 percent as more people entered the labor market.

Average hourly earnings increased a healthy US$0.08 and were up 2.6 percent year-on-year, while workers put in more hours.

“The July jobs report was everything you could have asked for and more. Provided the strength in jobs is confirmed with other economic data, the Fed will have sufficient reason to hike [rates] this year,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York.

The signs of labor market strength, particularly the pickup in wage growth, could become a factor in the US presidential election in November, given voter frustrations with an economic expansion that has left many Americans behind.

Last month’s strong jobs growth should reinforce the Fed’s confidence in a labor market that officials view as at or near full employment.

Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs per month to keep up with population growth.

The US central bank raised interest rates for the first time in nearly a decade in December last year, but since then has held rates steady amid concerns over persistently low US inflation and a global economic growth slowdown.

Given lingering global uncertainties and the upcoming US presidential election, most economists expect another interest rate increase only in December, but financial markets were less sure.

Of 21 primary US Treasury dealers who do business directly with the Fed, 13 said the central bank would raise its target interest rate by a quarter percentage point by the end of the year, compared with eight of 15 primary dealers in a July 8 poll.

Three of the banks polled said the Fed would raise rates at its Sept. 20 to Sept. 21 meeting, a slight shift from a month earlier when none thought the Fed would make such a move.

“The combination of strong employment and firming wage growth should remain supportive of income and consumer spending,” said Greg Daco, head of US macroeconomics at Oxford Economics in New York.

The payrolls data added to last month’s auto sales in underscoring the economy’s sound fundamentals.

The Atlanta Fed is forecasting GDP growth accelerating at a 3.8 percent annualized rate in the third quarter, after averaging a tepid 1 percent in the past three quarters.

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