The US labor numbers are in and things are looking surprisingly slow.
Aggregated figures revealed that while payroll numbers increased to 213,000 above estimates, which had been placed around 195,000, average hourly earnings rose 0.2% - below the forecasted 0.3%. Higher unemployment numbers also exacerbated the abrupt slowdown in wage growth: unemployment in the US now sits at 4%, up from the previous figure of 3.8%. This is the first rise in almost a year.
The numbers are testament to the fact that the labor market is not as tight as it was previously thought to be. This, coupled with the tepid wage growth, has proven to some that the economy is not overheating and the labor market still has room to expand. Any pressure on the Fed to accelerate interest rate hikes will therefore be lifted.
"This is a good job-creation number, but on the other hand we see still continued soft wage growth," said Michael Feroli, Chief US Economist at JPMorgan Chase & Co.
A simultaneous increase in both the number of hired workers and unemployment rate indicates that the workforce has grown and there are a higher number of people who are able and willing to offer their labor skills.
Local government employment has almost returned to pre-recession levels, while jobs at the state level have waned, US Bureau of Labor Statistics data show.
The monthly figures landed the same day that President Donald Trump intensified a global trade war by adding levies on $34 billion of Chinese goods, spurring retaliatory tariffs. That risks weighing on economic growth and the pace of hiring and investment. "We may be heading into a trade war but the good news is, the economy at least seems to have some good momentum," said Feroli.
"We still have some capacity to grow above trend without triggering too much inflation worry."
The report showed little, if any, evidence of tariff-related weakness in the economy, especially with continued strength in goods-producing jobs: manufacturing added 36,000 to payrolls, the best month since December, including a 12,000 increase in the auto industry, the most since August. This is consistent with other reports showing strength in factory activity.
The overall hiring trend continues to pick up, which is not surprising given that GDP growth is picking up and labor costs remain stable. More specifically, hiring in the manufacturing sector -- which should be the most sensitive to retaliatory trade sanctions -- is running at the fastest pace since 1998. It may simply be too soon to see tariff impacts, or it's possible that robust economic conditions, further bolstered by tax cuts, are simply not being affected by the sanctions put in place to date.
"There's definitely still a lot of room for the labor market to absorb the slack," Kevin Hassett, chairman of the White House Council of Economic Advisers, said on Bloomberg Television. The reason for the rise in the unemployment rate was "a stampede of people back into the labor force," he said.
