Modest US hiring and slow wage gains keep Wall Street happy
WASHINGTON (AP) — Hiring by U.S. employers slowed a bit as 2017 ended and pay growth was sluggish. Yet that’s actually how investors, at least, like it.
The modest but steady pace of hiring is a reassuring sign for investors who have been buoyed by the just-passed Republican tax plan and have been sending stock market indexes roaring to uncharted heights.
U.S. employers added 148,000 jobs in December, the Labor Department reported Friday. Though down from November’s 252,000, last month’s job gain was still enough to suggest that the economy entered the new year with solid momentum. The unemployment rate remained 4.1 percent for a third straight month, the lowest level since 2000.
The unspectacular pace of job growth and wage increases is welcome news for financial markets because if the numbers were much higher, investors would grow concerned that the Federal Reserve might accelerate its interest rate hikes to ward off potential increases in inflation. Higher rates, in turn, could slow the economy and send stocks down.
Taken as a whole, Friday’s report pointed to the job market’s strength and resilience 8½ years into an economic expansion. Hiring remains steady and is underpinning an economy that’s both contributing to and benefiting from an improved global outlook. The tax cuts are raising hopes for faster growth and higher corporate profits and fueling powerful gains in financial markets.
“I think it’s going to be an awfully good year,” said Carl Tannenbaum, chief economist at Northern Trust. “Absent something unforeseen, this could be one of the best years of the expansion.”
Investors again sent stock prices higher Friday, one day after the Dow Jones industrial average broke through the 25,000 mark for the first time.
“You’ve got the ‘Goldilocks’ pace for markets: Strong growth and low inflation,” Tannenbaum said.
The slowing pace of job growth isn’t surprising: It typically happens when unemployment falls to ultra-low levels and fewer people are available for hiring. Average monthly job growth has declined to 171,000 this year from a peak of 250,000 in 2014. Last year’s gains were the fewest since 2010.
Despite low unemployment and the difficulty some employers face in finding enough qualified workers, pay gains remain sluggish. Average hourly earnings rose 2.5 percent in December from a year earlier — about a full percentage point lower than is typical in a healthy economy.
At the same time, the unemployment rate for African-Americans reached a record low of 6.8 percent in December. And the jobless rate for veterans of Afghanistan and Iraq fell to 3.3 percent, also a record low.
The African-American rate is still far higher than the rate for whites, which was 3.7 percent, or Asian-Americans, at 2.5 percent. Even among job applicants with similar education or experience, unemployment is typically higher for blacks than for whites — evidence, economists say, of discrimination and other disadvantages.
Solid economic growth in both the United States and major countries overseas is supporting more overall hiring. Factory managers say new orders grew more quickly in December than in any month since 2004. Retailers have reported strong holiday sales. Builders are ramping up home construction to meet growing demand.
Last month, blue collar hiring showed solid gains: Manufacturing and construction added 25,000 and 30,000 jobs, respectively. A category that includes hotels and restaurants gained 29,200.
Retailers cut 20,300 jobs, mostly in department store chains such as Macy’s, which announced this week that it would close 11 additional stores. That suggests that stores hired fewer seasonal workers for the winter holidays, a sign of the impact of e-commerce.
Most economists expect the Trump administration’s tax cuts to help speed the economy’s already decent pace of growth. Some envision the unemployment rate dropping as low as 3.5 percent by the end of 2018. That would be the lowest rate in nearly a half-century and could finally force employers to raise pay at a much faster pace to attract workers. Many businesses might also seek to automate some tasks to slow labor costs.
Tom Gimbel, chief executive of the LaSalle Network, a recruiting firm in Chicago, said his clients are eager to hire and are willing to pay higher fees to attract workers who already have jobs. Some of his clients are expanding their HR departments because they expect hiring to be more difficult with unemployment so low.
“In 23 years, it’s the best job market I’ve ever seen,” Gimbel said. “I don’t see that changing.”
Many business are already howling that they can’t find enough qualified people. There are roughly 6 million available jobs, near a record high, according to government data.
Wayne Jones, CEO of Anthony’s Coal-Fired Pizza, a 65-restaurant chain, says his company had to work harder to find employees when it opened its first restaurant in Chicago in October. After a successful holiday season, the chain expects to open another restaurant in Chicago in the spring, creating roughly 70 jobs, and three more restaurants by year’s end.
In Chicago, the chain took longer to staff up for its first restaurant, in order to find the right candidates. The company has kept wage growth above inflation: A starting cook can make up to $16 an hour.
“As the economy picks up steam,” Jones said, “you can feel there’s more pressure on wages.”