Published: Sun, November 04, 2018
Money | By Ralph Mccoy

U.S. Jobs Report Signals More Interest Rate Hikes Ahead

U.S. Jobs Report Signals More Interest Rate Hikes Ahead

US employers added a stellar 250,000 jobs last month and raised average pay by the most in almost a decade.

USA job growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years, pointing to further labor market tightening that could encourage the Federal Reserve to raise interest rates again in December.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to 62.9 percent last month from 62.7 percent in September.

By some measures, consumers are the most confident they have been in 18 years, and their spending is propelling brisk economic growth.

For a US economic expansion now in its 10th year, hiring remains robust, growth has picked up and the outlook is a mostly bright one on the eve of congressional elections.

Trump and Republican candidates painted the jobs report as further proof of an economic boom, but many independent economists warn that growth has probably peaked and that it is likely there will be a slowdown, especially if trade tensions continue to escalate.

"Faster wage growth along with a remarkably strong employment report in October will certainly lend some support to the hawks".

The labor-market data would likely keep the Federal Reserve on track to gradually lift its benchmark interest rate.

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Revisions were a net wash for payrolls in prior two months, as August was revised up 16,000 and September revised down 16,000; three-month average gain of 218,000. President Donald Trump cheered the robust jobs report, which came less than a week before the midterm elections that will decide who controls the U.S. Congress. The Fed is expected to raise rates for a fourth time this year in December, and economists expect at least two further increase next year.

Job growth in the United States slowed considerably in September, largely because of Hurricane Florence's devastating run through the Carolinas.

The prospects for Republicans contrast with numbers such as broad-based hiring in October, including 30,000 in construction, 32,000 in manufacturing and 179,000 in services. A separate report Wednesday showed that wages and salaries for private-sector workers rose 3.1 percent from a year earlier. Average monthly hiring this year is above the pace of 2017. Construction expanded by 30,000 roles, almost half of which focus on residential homes. Polls show that while voters broadly approve of the economy, they give low ratings to Trump himself.

Americans boosted their spending by the most in almost four years in the July-September quarter.

The labor force participation rate also ticked up in October to 62.9%, a 0.2% increase from September. But slower sales have started to limit home price increases, which had been running at more than twice the pace of wage gains.

The stimulus "is driving strong growth, but we have a almost trillion dollar deficit and at some point we have to pay for that", said Stevenson, who is now an associate professor at the University of MI.

Although pay increases can help boost spending and propel the economy's growth, they can also lead companies to raise prices to cover their higher labor costs.

Economists also noted that the pay increase remains well above the inflation rate. The Fed raised its benchmark federal-funds rate in September to a range between 2% and 2.25%, and most officials signaled they expected to lift rates by another percentage point through next year.

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