US wage growth slows despite unemployment rate at 50-year low

Employers created 145,000 jobs; below economists’ forecasts for an increase of 160,000

(AP)

Wage growth in the United States slowed while manufacturers cut jobs in December, according to figures that will relieve pressure on the central bank to raise interest rates.

The drop in annual wage growth to 2.9 per cent from 3.1 per cent in November was the first time it had fallen below 3 per cent since July 2018, according to the data from the US labour department.

Employers created 145,000 jobs against economists’ forecasts for an increase in non-farm payrolls of 160,000. It was below on November’s strong gain of 256,000. However, the unemployment rate remained stable at its 50-year low of 3.5 per cent.

The mixed messages from the report are unlikely to change the Federal Reserve’s assessment that measures of wage growth had generally remained “moderate” when it meets for it rate-setting meeting at the end of the month, analysts said.

“The slowdown in hourly wage growth to an 18-month low of 2.9 per cent is another illustration that, even as economic growth accelerates again this year, muted underlying inflation will allow the Fed to keep interest rates low,” said Paul Ashworth, chief US economist at Capital Economics.

Speaking on Thursday Richard Clarida, vice chair of the Federal Reserve, said that the unemployment rate was at a 50-year low, and wages were rising broadly in line with productivity growth and underlying inflation. “We are not seeing any evidence to date that a strong labour market is putting excessive pressure on price inflation,” he said.

Manufacturing employment fell by 12,000 and mining by 8,000 while the falls were offset by gains in the services sector. Manufacturing added only 46,000 job in 2019 compared to 264,000 in 2018.

Retailers added 41,000 jobs while employment in health care increased by 28,000 and leisure and hospitality added 40,000 posts. Construction added 20,000 jobs which may have been due to milder-than-normal temperatures in December.

Robert Martin, an economist at UBS, described the increase in retail jobs as “unbelievable”, saying there was evidence of shops being shuttered towards the end of the year. “This sector has been hard hit by both the tariffs and the general consolidation in brick and mortar retail over the past few years,” he said.

Around 100,000 jobs per month are needed to keep up with growth in the working-age population. Data for October and November was revised to show 14,000 fewer jobs added than previously reported.

James Knightley, chief international economist at ING bank, said US showed a theme of a two-speed economy where manufacturing continued to struggle, while the service sector was performing relatively well. “Jobs continue to be created in decent numbers, but there is little wage inflation threat despite apparently tight labour markets,” he said.

On Wall Street US equities rose to record highs for the day after the report, with the Dow Jones Industrial Average crossing 29,000 for the first time, although the market had already been boosted by receding fears of a full-blown conflict between the US and Iran.