The US economy delivered 156,000 new jobs in August. It’s not a poor figure but it’s lower than the 180,000 expected by Wall Street in the closely watched nonfarm payrolls, and does represent a slowdown in what had been a bullish pace of growth in employment for the first time in several months. The figure for July was also revised down to 189,000 from an original reading of 209,000.
All that means that the unemployment rate edged higher, to 4.4 per cent from 4.3 per cent previously.
Stepping back from the headlines, that still points to a strong economy on the jobs front. And it should be noted that August has been a bit of an outlier in recent times, with the announced figures undershooting median forecasts in each of the past seven years.
Of more concern is the stubbornly low rate of wage inflation – just 2.5 per cent up year on year.
That’s the figure that has the Fed carefully considering if this is, after all, the right time to start increasing interest rates. Central bankers are looking for a fix on why exactly a jobs market that is close to full employment is still struggling to push up wages.
And while it is certainly not yet a problem for President Donald Trump – never a man to claim credit for good news on the economy – the failure of his core support base to secure the feel-good factor of higher wages runs the risk of alienating those voters who delivered him the White House.
For the Fed, a separate concern is that the disruptive impact of Hurricane Harvey is going to start to feed into the figures over the next few months, making it harder again to get an accurate reading on the true employment trends in the economy. And by the time that volatility finishes working its way through the system, the moment for moving on rates may have passed, creating further hazard for economic growth as midterm elections loom.
