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Wage gains slow, unemployment up from 18-year low

08 July 2018

Private employers expanded their payrolls for the 93rd consecutive month in June, by 213,000 jobs, the Department of Labor's employment situation report showed yesterday.

Economists were forecasting that June was another strong month for the US labor market, with nonfarm payrolls expected to have grown by 195,000 during the month with the unemployment rate holding steady at an 18-year low of 3.8%, according to estimates compiled by Bloomberg.

The unemployment rate ticked up to 4% from 3.8%, but this was because more people entered the labour force looking for work.

The economy has now been adding jobs for almost 8 years.

Employers in the United States are thought to have kept up their brisk pace of hiring in June, reflecting the durability of the second-longest USA economic expansion on record even in the face of a trade war with China. The low jobless rate has yet to force employers to offer higher wages in order to fill job openings.

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Policymakers at the Federal Reserve, the United States central bank, monitor the report because they can raise interest rates when employment is close to full, wages are rising healthily and unemployment is low.

While improving prospects for employment and wages are helping attract people from the sidelines of the job market, the retirements of older workers are among factors that have been exerting downward pressure on participation.

The U.S. economy faces potential drags going forward, including escalating trade disputes with major trading partners such as the European Union, China, Canada and Mexico.

"There's definitely still a lot of room for the labour market to absorb the slack", Kevin Hassett, chairman of the White House Council of Economic Advisers, said on Bloomberg Television. Average hourly earnings rose 2.7 percent year over year, slightly below expectations of a 2.8 percent increase.

Expressed another way, the monthly average jobs jump in first-half of 2018 has been +17% compared with the first-half of 2017.

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But average, hourly earnings increased in both May and June, according to BLS numbers.

"The tariffs jumble things about what we should expect to see in the next few months", said Cathy Barrera, chief economist at ZipRecruiter, the online jobs marketplace. The manufacturing sector buzzed with activity last month, and spending on construction rose. On the same day as the release of June's jobs report, the US and China are imposing duties on more than $30 billion-worth of each other's goods.

Just hours before the monthly reports came out, the Trump administration imposed tariffs on $34 billion worth of Chinese imports, prompting the Asian country to immediately reiterate.

One notable weak spot was the retail sector which lost 22,000 jobs in the month. Manufacturing and professional and business services saw gains, with 36,000 and 50,000 jobs added, respectively.

The gain in USA total employment through the first half of this year has been 1.3 million jobs.

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Wage gains slow, unemployment up from 18-year low