Promising Job Growth After Slowness This Year, but Wage Growth Still Disappoints

Posted July 10, 2017

WASHINGTON-U.S. employers picked up their pace of hiring in June, evidence of sustained economic momentum heading into the second half of the year. Though the rate of job growth has slowed since 2014 and 2015, it's still enough to draw in people who had previously stopped looking for work.

It's welcome news after the prior two jobs reports had hinted at a possible slowdown in job growth.

"Inflation has been very, very low and, usually, businesses raise their workers' pay by at least the rate of inflation", said Mr Ryan Sweet, an economist at Moody's Analytics. In June, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $22.03. Yet job growth has slowed from its peak in 2016. The U.S. added 207,000 jobs in April, an upward revision of 33,000.

The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

Many workers are too cautious to push for raises, Moody's chief economist Zandi said, partly because of the lingering impact of the recession, when almost 9 million people lost jobs.

June's jobs report reflects this, according to senior economic analyst Mark Hamrick. "It suggests there's still a fair amount of vitality in the us labor market", said Nariman Behravesh, chief economist at IHS Markit, a business research and analysis firm. Underemployment includes part-time workers who want a full-time job, as well as skilled workers who hold low-skill jobs.

Friday's report from the Labor Department also says the unemployment rate edged up slightly to 4.4 percent.

"There's still a fair amount of slack in the labor market", said IHS Markit chief economist Nariman Behravesh.

Let's see what the numbers could mean for the markets and the monetary policies of the Fed and the European Central Bank. "While we may see the Fed trimming its balance sheet later this year, another rate hike is looking less likely".

The Labor Department credited increased worker hours for the surge. That's below the 3.5 per cent pace typical of a healthy economy. The longer wages trail behind, the more investors begin to worry that wages will spike.

IBD'S TAKE: IBD changed its market outlook to "uptrend under pressure" on Tuesday, June 27, a signal to investors to exercise extra caution in buying stocks and to take some money off the table to deploy when the turbulence subsides. Samana said investors still have time to align their portfolios and get properly invested.

"It's good to see even this small increase in the labor force participation rate", said Bob Funk, CEO of Express Employment Professionals, and the former Chairman of the Federal Reserve Bank of Kansas City. The Dow Jones industrial average was up 95 points in mid-afternoon trading, while the S&P 500 was ahead 16-plus points, to 2,426.