US economy falls short on job creation

The US economy created fewer jobs in December than economists had forecast while wages edged up in line with expectations.

Non-farm payrolls rose by 148,000 in December, short of economists’ expectations for 190,000 - the slowest pace since a string of hurricanes battered the US, weighing on the job market in September. However, November’s figures were revised up to show 252,000 jobs created in November, the Bureau of Labour Statistics said on Friday. The report showed that after revisions, job gains have averaged 204,000 over the last three months adding to evidence that the economy is close to full employment.

The unemployment rate held steady at 4.1 per cent for the third straight month and at levels last seen 17 years ago. Meanwhile average hourly earnings edged up, rising 0.3 per cent from the previous month when they increased by a downwardly revised 0.1 per cent. Wages were up 2.5 per cent year-on-year in line with expectations.

The report showed that retail sector shed 20,000 jobs last month during the crucial holiday shopping season and employment fell by 67,000 last year, compared with an increase of 203,000 in 2016. Meanwhile, the healthcare sector created 31,000 jobs last month and 300,000 jobs last year.

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Dollar

The US dollar declined against other major currencies on Friday as job creation missed forecasts, with the dollar index that measures the greenback against six trading partners down nearly 0.1 per cent at 91.793. Ahead of the report some economists had predicted job growth that was more pessimistic than consensus numbers suggested as the labour market continues to normalise following the impact of hurricanes Harvey and Irma that have skewed recent readings.

While wages edged up in December policymakers remain puzzled by sluggish inflation, which they have put down to transitory factors. The puzzle on inflation alongside uncertainty about taxes has raised questions about how many times the Federal Reserve will raise interest rates this year. At its December meeting, the central bank signalled three rate rises in 2018. For now the central bank is expected to leave interest rates unchanged in January but the implied probability of a rate increase in March climbed to 73 per cent from 50 per cent a week ago, according to CME calculations based on federal funds futures.

– Copyright The Financial Times Limited 2018