Tag Archives: Labor Department

U.S. weekly jobless claims retreat from one-and-a-half-year high

Job seekers and recruiters gather at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits dropped from near a 1-1/2-year high last week, but the decline was less than expected, suggesting some moderation in the pace of job growth.

Still, the Labor Department’s report on Thursday continued to point to strong job market conditions, which should underpin the economy amid rising headwinds, including a fading fiscal stimulus boost and a trade war between Washington and Beijing, as well as slowing growth in China and Europe.

The Federal Reserve last week kept interest rates steady but said it would be patient in lifting borrowing costs further this year in a nod to growing uncertainty over the economy’s outlook. The U.S. central bank removed language from its December policy statement that risks to the outlook were “roughly balanced.”

“Labor market conditions remain quite positive, good news for workers, for the consumer sector and the economy more broadly,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

Initial claims for state unemployment benefits tumbled 19,000 to a seasonally adjusted 234,000 for the week ended Feb. 2, the Labor Department said on Thursday. The drop partially unwound the prior week’s jump, which lifted claims to 253,000, the highest reading since September 2017.

Claims that week were boosted by layoffs in the service industry in California, most likely striking teachers in Los Angeles.

A 35-day partial shutdown of the federal government as well as difficulties adjusting the data around moving holidays like Martin Luther King Jr. day, which occurred later this year than in recent years, also probably contributed to the spike in filings.

The longest shutdown in history likely forced workers employed by government contractors to file claims for unemployment benefits.

The shutdown ended on Jan. 25 after President Donald Trump and Congress agreed to temporary government funding, without money for his U.S.-Mexico border wall.

Economists polled by Reuters had forecast claims falling to 221,000 in the latest week.

U.S. stocks were trading lower on renewed fears of a global slowdown after the European Union cut its economic growth forecasts and White House adviser Larry Kudlow warned there was still a sizable distance to go on U.S.-China trade talks. The dollar was little changed against a basket of currencies, while U.S. Treasury prices rose.

MOMENTUM SLOWING

The Labor Department said no states were estimated last week. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 4,500 to 224,750 last week. Claims by federal government workers, which are filed separately and with a one-week lag fell 8,070 to 6,669 in the week ended Jan. 26.

“Claims remain important to watch in the weeks ahead,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in White Plains, New York. “The data are suggesting at least some slowing in employment growth.”

The government reported last Friday that non-farm payrolls increased by 304,000 jobs in January, the largest gain since February 2018. Thursday’s claims report showed the number of people receiving benefits after an initial week of aid fell 42,000 to 1.74 million for the week ended Jan. 26.

These so-called continuing claims had raced to a nine-month high in the prior week. The four-week moving average of continuing claims rose 4,250 to 1.74 million.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. weekly jobless claims jump to near one-and-a-half year high

FILE PHOTO - A man holds a leaflet at a military veterans' job fair in Carson, California October 3, 2014. REUTERS/Lucy Nicholson

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits surged to near a 1-1/2-year high last week, but economists dismissed the jump as a fluke and said temporary factors, including a partial government shutdown, were to blame.

A strike by teachers in California, cold weather and difficulties adjusting the data around moving holidays like Martin Luther King Jr. Day also likely were factors in the spurt in claims reported by the Labor Department on Thursday.

“We are skeptical the rise could reflect a true weakening in the labor market given that there are few other signs of weaker labor markets in January,” said John Ryding, chief economist at RDQ Economic in New York. “Nonetheless, if we maintain this higher level of jobless claims in the coming weeks, that would indicate a pickup in layoff activity.”

Initial claims for state unemployment benefits jumped 53,000 to a seasonally adjusted 253,000 for the week ended Jan. 26, the highest level since September 2017, the Labor Department said. The rise was also the largest since September 2017.

Claims dropped to 200,000 in the prior week, which was the lowest level since October 1969. Economists polled by Reuters had forecast claims rising to only 215,000 in the latest week.

The claims data covered the Martin Luther King Jr. holiday, which occurred later this year than in the past. Economists believe non-federal government workers who were temporarily unemployed during the longest government shutdown in the country’s history likely helped to boost claims last week.

The surge in claims came amid a recent deterioration in business and consumer confidence, which was partly blamed on a five-week government shutdown that has since ended.

The Federal Reserve on Wednesday kept interest rates steady but said it would be patient in lifting borrowing costs further this year in a nod to growing uncertainty over the economy’s outlook. The U.S. central bank removed language from its December policy statement that risks to the outlook were “roughly balanced.”

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 5,000 to 220,250 last week.

The claims data has no bearing on January’s employment report, which is scheduled for release on Friday, as it falls outside the survey period. According to a Reuters survey of economists, non-farm payrolls likely increased by 165,000 jobs in January after jumping by 312,000 in December.

The 35-day government shutdown is not expected to have an impact on January’s job growth, as workers who were furloughed will be paid retroactively together with colleagues who worked without pay. However, those workers who stayed at home during the shutdown are expected to temporarily push up the unemployment rate in January.

The dollar fell against most major currencies, dropping to a two-week low versus the yen, pressured by the Fed’s cautious economic outlook. U.S. Treasury yields fell, while stocks on Wall Street were trading mostly higher.

STEADY WAGE GAINS

Underscoring the labor market’s strength, another report on Thursday from the Labor Department showed its Employment Cost Index, the broadest measure of labor costs, increased 0.7 percent in the fourth quarter after rising 0.8 percent in the July-September period.

The fourth quarter rise lifted the year-on-year rate of increase in labor costs to 2.9 percent, the biggest gain since June 2008, from 2.8 percent in the 12 months through September.

Wages and salaries, which account for 70 percent of employment costs, rose 0.6 percent in the fourth quarter after advancing 0.9 percent in the prior period. They were up 3.1 percent in the 12 months through December.

That was the biggest increase since June 2008 and followed a 2.9 percent gain in the year through September.

“It supports our view that the tightness in the labor market is generating upward pressure on compensation,” said Daniel Silver, an economist at JPMorgan in New York.

While the labor market is on solid footing, manufacturing appears to be slowing. A third report on Thursday showed the MNI Chicago business barometer dropped 7.1 points to a reading of 56.7 in January as new orders tumbled to a two-year low. The survey’s measure of production dropped to a 10-month low.

There was some good news on the housing market. The Commerce Department reported new home sales vaulted 16.9 percent in November to a seasonally adjusted annual rate of 657,000 units. The surge erased October’s 8.3 percent plunge in single-family home sales.

The November home sales report was delayed by the government shutdown, which affected the Commerce Department.

The housing market struggled in 2018, weighed down by acute shortages of homes for sales, which boosted prices, as well as higher mortgage rates. But there are glimmers of hope as house price inflation has slowed significantly and mortgage rates have eased after shooting up last year.

Supply, however, still remains tight.

“We expect a further rise in new home sales during 2019 as homebuyers look to new builds, with inventory conditions for existing homes still extremely tight,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

U.S. weekly jobless claims point to strong labor market

FILE PHOTO: People wait in line to attend TechFair LA, a technology job fair, in Los Angeles, California, U.S., January 26, 2017. REUTERS/Lucy Nicholson/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing applications for jobless benefits fell more than expected last week, pointing to sustained labor market strength that could further ease concerns about the economy’s health.

The report from the Labor Department on Thursday followed data last week showing employers hired the most workers in 10 months in December and increased wages for their workers.

Surveys showing steep declines in consumer and manufacturing activity in December had stoked fears that the economy was rapidly losing momentum.

“There are increasing risks and caution over the economic outlook in 2019, but jobless claims say the seas are calm and it looks to be smooth sailing for the economy for now,” said Chris Rupkey, chief economist at MUFG in New York.

Initial claims for state unemployment benefits fell 17,000 to a seasonally adjusted 216,000 for the week ended Jan. 5. Data for the prior week was revised up to show 2,000 more applications received than previously reported.

Economists polled by Reuters had forecast claims declining to 225,000 in the latest week. The Labor Department said only claims for Puerto Rico were estimated last week.

U.S. financial markets were little moved by the claims report.

Claims were boosted in the week ending Dec. 29 as workers furloughed because of a partial shutdown of the U.S. government applied for benefits. The federal government partially closed on Dec. 22 as President Donald Trump demanded that the U.S. Congress give him $5.7 billion this year to help build a wall on the U.S. border with Mexico.

The shutdown, which has affected a quarter of the government, including the Commerce Department, has left 800,000 employees furloughed or working without pay. Private contractors working for many government agencies are also without pay.

FEDERAL WORKER CLAIMS RISE

Claims by federal workers are reported separately and with a one-week lag. The number of federal employees filing for jobless benefits increased by 3,831 to 4,760 in the week ending Dec. 29. Furloughed federal government workers can submit claims for unemployment benefits, but payment would depend on whether Congress decides to pay their salaries retroactively.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 2,500 to 221,750 last week.

The economy created 312,000 jobs in December. The unemployment rate rose two-tenths of a percentage point to 3.9 percent as some unemployed Americans piled into the labor market, confident of their job prospects.

While labor market strength has helped to calm fears that the economy, tighter financial market conditions and slowing global growth could make the Federal Reserve cautious about raising interest rates this year.

Minutes of the U.S. central bank’s Dec. 18-19 policy meeting published on Wednesday showed “many” officials were of the view that the Fed “could afford to be patient about further policy firming.”

The Fed has forecast two rate hikes this year. Fed Chairman Jerome Powell and several policymakers have said they would be patient and flexible in policy decisions this year.

Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid fell 28,000 to 1.72 million for the week ended Dec. 29. The four-week moving average of the so-called continuing claims increased 15,250 to 1.72 million.

November’s wholesale inventories report from the Commerce Department’s Census Bureau, which was scheduled for release on Thursday, will not be published because of the government shutdown.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. private payrolls surge in December; weekly jobless claims rise

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. private payrolls increased by the most in nearly two years in December, suggesting sustained strength in the labor market despite ongoing financial market volatility.

While other data on Thursday showed the number of Americans filing applications for unemployment benefits increased more than expected last week, the underlying trend in claims remained low. Claims data tend to be volatile around year-end holidays.

Labor market data is being closely watched for signs of whether tightening financial conditions could be impacting on companies’ hiring decisions. A sharp stock market sell-off has stoked fears about the economy’s health.

The ADP National Employment Report showed private payrolls rose by 271,000 jobs last month after a downwardly revised 157,000 increase in November. Economists polled by Reuters had forecast private payrolls advancing 178,000 last month following a previously reported 179,000 increase in November.

The ADP report, which is jointly developed with Moody’s Analytics, was published ahead of the government’s more comprehensive employment report for December scheduled for release on Friday.

The ADP report has a spotty record predicting the private-payrolls component of the government’s employment report and last month’s jump probably exaggerates the strength of the labor market.

“The December ADP data have been especially unreliable because of the challenge of adjusting for ‘purging’ effects,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in White Plains, New York.

“December is typically when employers drop from their listings all individuals who have left their firms permanently,” he said. “Such workers are dropped from the government data when they are no longer being paid, but some employers keep former employees on their lists for ADP until year-end tax documents have been filed.”

According to a Reuters survey of economists, nonfarm payrolls likely increased by 177,000 jobs last month after rising 155,000 in November. The unemployment rate is forecast steady near a 49-year low of 3.7 percent, not too far from the Federal Reserve’s forecast of 3.5 percent by the end of 2019.

With the labor market viewed at being at or beyond full employment, the pace of job growth is slowing as employers struggle to find workers. Some of the moderation in employment gains has been attributed to the stock market rout.

The Fed raised interest rates last month for the fourth time in 2018, but forecast fewer rate hikes this year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

U.S. financial markets were little moved by the data.

In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 231,000 for the week ended Dec. 29. Data for the prior week was revised higher to show 5,000 more applications received than previously reported.

Economists polled by Reuters had forecast claims increasing to 220,000 in the latest week.

The Labor Department said claims for California and Virginia were estimated last week. Unadjusted claims for both of those states declined last week.

A Labor Department official said there was no indication of an increase in filings last week from federal workers furloughed because of a partial shutdown of the government that is now in its second week.

Data on claims filed by federal employees is released with a one-week lag. The shutdown, which started on Dec. 22, was triggered by President Donald Trump’s demand for $5 billion in border wall funding.

Some 800,000 employees from the Departments of Homeland Security, Transportation, Commerce and others have been furloughed or are working without pay.

Claims data tends to be noisy around year-end holidays. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, slipped 500 to 218,750 last week.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. job growth cools; unemployment rate falls to 3.7 percent

People wait in line at a stand during the Executive Branch Job Fair hosted by the Conservative Partnership Institute at the Dirksen Senate Office Building in Washington, U.S., June 15, 2018. REUTERS/Toya Sarno Jordan

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth slowed sharply in September likely as Hurricane Florence depressed restaurant and retail payrolls, but the unemployment rate fell to near a 49-year low of 3.7 percent, pointing to a further tightening in labor market conditions.

The Labor Department’s closely watched monthly employment report on Friday also showed a steady rise in wages, suggesting moderate inflation pressures, which could ease concerns about the economy overheating and keep the Federal Reserve on a path of gradual interest rate increases.

Nonfarm payrolls increased by 134,000 jobs last month, the fewest in a year, as the retail and leisure and hospitality sectors shed employment. Data for July and August were revised to show 87,000 more jobs added than previously reported.

The economy needs to create roughly 120,000 jobs per month to keep up with growth in the working-age population.

“The weaker gain in payrolls in September may partly reflect some hit from Hurricane Florence,” said Michael Pearce, senior U.S. economist at Capital Economics in New York. “There is little in this report to stop the Fed continuing to raise interest rates gradually.”

Economists polled by Reuters had forecast payrolls increasing by 185,000 jobs in September and the unemployment rate falling one-tenth of a percentage point to 3.8 percent.

Fed Chairman Jerome Powell said on Tuesday that the economy’s outlook was “remarkably positive” and he believed it was on the cusp of a “historically rare” era of ultra-low unemployment and tame inflation.

The U.S. central bank raised rates last week for the third time this year and removed the reference in its post-meeting statement to monetary policy remaining “accommodative.”

The Labor Department said it was possible that Hurricane Florence, which lashed South and North Carolina in mid-September, could have affected employment in some industries. It said it was impossible to quantify the net effect on employment.

Payrolls are calculated from a survey of employers, which treats any worker who was not paid for any part of the pay period that includes the 12th of the month as unemployed. The average workweek was unchanged at 34.5 hours in September.

The smaller survey of households from which the jobless rate is derived regards persons as employed regardless of whether they missed work during the reference week and were unpaid as result. It showed 299,000 people reported staying at home in September because of bad weather. About 1.5 million employees worked part-time because of the weather last month.

U.S. stock index futures briefly turned positive after the data before reversing course. The dollar <.DXY> was trading lower against a basket of currencies while U.S. Treasury yields were higher.

DIMINISHING SLACK

The drop of two-tenths of a percentage point in the unemployment rate from 3.9 percent in August pushed it to levels last seen in December 1969 and matched the Fed’s forecast of 3.7 percent by the end of this year.

Average hourly earnings increased 0.3 percent in September after a similar rise in August.

With September’s increase below the 0.5 percent gain notched during the same period last year, the annual rise in wages fell to 2.8 percent from 2.9 percent in August, which was the biggest advance in more than nine years.

Wage growth remains sufficient to keep inflation around the Fed’s 2 percent target. As more slack is squeezed out of the labor market, economists expect annual wage growth to hit 3 percent.

Last month, employment in the leisure and hospitality sector fell by 17,000 jobs, the first drop since September 2017. Retail payrolls dropped by 20,000 jobs in September.

Manufacturing payrolls increased by 18,000 in September after rising by 5,000 in August.

Construction companies hired 23,000 more workers last month after increasing payrolls by 26,000 jobs in August. Professional and business services employment increased by 54,000 jobs last month and government payrolls rose 13,000.

While surveys have shown manufacturers growing more concerned about an escalating trade war between the United States and China, it does not appear to have affected hiring. In fact, the Fed’s latest survey of national business conditions reflected concerns about labor shortages that are extending into non-skilled occupations as much as about tariffs.

Washington last month slapped tariffs on $200 billion worth of Chinese goods, with Beijing retaliating with duties on $60 billion worth of U.S. products. The United States and China had already imposed tariffs on $50 billion worth of each other’s goods. The trilateral trade agreement between the United States, Canada and Mexico was salvaged in an 11th-hour deal on Sunday.

Despite the Trump administration’s protectionist trade policy, the trade deficit continues to deteriorate. The trade gap increased 6.4 percent to a six-month high of $53.2 billion in August, the Commerce Department reported on Friday.

The politically sensitive goods trade deficit with China surged 4.7 percent to a record high of $38.6 billion.

(Reporting by Lucia Mutikani; Editing by Leslie Adler and Paul Simao)

Record U.S. job openings, quits rate boost wage growth outlook

FILE PHOTO: People attend the Executive Branch Job Fair hosted by the Conservative Partnership Institute at the Dirksen Senate Office Building in Washington, U.S., June 15, 2018. REUTERS/Toya Sarno Jordan/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job openings surged to a record high in July and more Americans voluntarily quit their jobs, pointing to sustained labor market strength and confidence that could soon spur faster wage growth.

The Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS, released on Tuesday also suggested a further tightening in labor market conditions, with employers appearing to increasingly have trouble finding suitable workers.

While the tightening labor market could boost wage gains, some economists warned that worker shortages could over time negatively impact economic growth. The JOLTS report cemented expectations the Federal Reserve will raise interest rates at its Sept. 25-26 policy meeting. The Fed has raised rates twice this year.

“The economic expansion is on a collision course with a lack of workers to man the shop floors, work the restaurants and stores at the shopping malls across America,” said Chris Rupkey, chief economist at MUFG in New York. “No workers, no growth, it’s that simple.”

Job openings, a measure of labor demand, increased by 117,000 to a seasonally adjusted 6.9 million in July. That was the highest level since the series started in December 2000. The jobs openings rate was 4.4 percent, unchanged from the previous month and an all-time high first touched in April.

The current level of job openings means there is a job for every one of the 6.2 million people who were unemployed in August. Hiring was little changed at 5.7 million in July, keeping the hiring rate at 3.8 percent for a second straight month.

There were 46,000 unfilled jobs in the finance and insurance industry in July. Nondurable goods manufacturing had 32,000 vacancies. The job opening rate in the overall manufacturing industry climbed to a record high of 3.8 percent in July from 3.6 percent in June.

But job openings in the retail trade industry fell by 85,000. There were also decreases in education and federal government job vacancies in July.

WORKER SHORTAGES

The scarcity of workers was also corroborated by a survey of small businesses published on Tuesday. The NFIB survey found that job openings at small businesses hit a 45-year high in August. A record number of businesses reported they could not find qualified workers to fill open positions.

According to the NFIB, job openings were mostly prevalent in construction, manufacturing and wholesale trade. There was also a dearth of truck drivers.

“Looming shortages of qualified workers could prove detrimental to business expansion plans in coming months,” Dante DeAntonio, an economist with Moody’s Analytics in West Chester, Pennsylvania. “In the meantime, the increasing tightness in the labor market is spurring more workers to re-enter the workforce as well as leave their jobs in search of better opportunities.”

The worker shortages, especially for truck drivers, are already contributing to bottlenecks in the supply chain, which could slow the vibrant economy. The economy grew at a 4.2 percent annualized rate in the second quarter, almost double the 2.2 percent pace set in the January-March period.

Growth this year is expected to top 3 percent.

The Labor Department’s JOLTS report also showed the robust labor market is giving Americans confidence to quit their jobs for other positions. The quits rate increased to 2.4 percent in July, the highest level since April 2001, from 2.3 percent in June. Fed officials look at the quits rate as a measure of job market confidence.

The increase in job mobility supports economists’ optimism that job growth may be finally on a faster path. The government last week reported a surge in annual wage growth in August, with average hourly earnings increasing 2.9 percent, the largest gain since June 2009, from 2.7 percent in July.

Wage gains have largely remained moderate even as the unemployment rate has dropped to near an 18-year low of 3.9 percent.

“Workers are leveraging the tighter labor market to find new opportunities and employers are poaching workers from other firms,” said Nick Bunker, an economist at job search website Indeed in Washington. “The next question is how more quitting will translate into higher wage growth.”

 

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. job growth slows in July, unemployment rate dips

FILE PHOTO: People wait in line to attend TechFair LA, a technology job fair, in Los Angeles, California, U.S., January 26, 2017. REUTERS/Lucy Nicholson

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth slowed more than expected in July as employment in the transportation and utilities sectors fell, but a drop in the unemployment rate suggested that the labor market was tightening.

Nonfarm payrolls increased by 157,000 jobs last month, the Labor Department said on Friday. The economy created 59,000 more jobs in May and June than previously reported and needs to generate about 120,000 jobs per month to keep up with growth in the working-age population.

The unemployment rate fell one-tenth of a percentage point to 3.9 percent in July, even as more people entered the labor force in a sign of confidence in their job prospects. The low unemployment rate could allow the Federal Reserve to raise interest rates again in September.

The jobless rate had risen in June from an 18-year low of 3.8 percent in May. Economists polled by Reuters had forecast nonfarm payrolls increasing by 190,000 jobs last month and the unemployment rate falling to 3.9 percent.

The slowdown in hiring last month likely is not the result of trade tensions, which have escalated in recent days, but rather because of a shortage of workers. There are about 6.6 million unfilled jobs in the nation. A survey of small businesses published on Thursday showed a record number in July of establishments reporting that they could not find workers.

According to the NFIB, the vacancies were concentrated in construction, manufacturing and wholesale trade industries. Small businesses said they were also struggling to fill positions that did not require skilled labor.

The Fed’s Beige Book report last month showed a scarcity of labor across a wide range of occupations, including highly skilled engineers, specialized construction and manufacturing workers, information technology professionals and truck drivers.

The shortage of workers is steadily pushing up wages.

Average hourly earnings increased seven cents, or 0.3 percent, in July after gaining 0.1 percent in June. The annual increase in wages was unchanged at 2.7 percent in July.

U.S. stock market futures dipped after the data while the dollar <.DXY> fell against a basket of currencies. Prices of U.S. Treasuries were slightly higher.

TRADE TENSIONS

President Donald Trump’s administration has imposed duties on steel and aluminum imports, provoking retaliation by the United States’ trade partners, including China, Canada, Mexico and the European Union. It has also slapped 25 percent tariffs on $34 billion worth of Chinese imports.

Beijing has fought back by slapping tariffs on U.S. exports to China. On Friday, China’s Commerce Ministry said a new set of proposed import tariffs on $60 billion worth of U.S. goods are rational and restrained and warned that it reserves the right of further countermeasures in the intensifying trade war.

On Wednesday, Trump proposed a higher 25 percent tariff on $200 billion worth of Chinese imports.

Economists have warned that the tit-for-tat import duties, which have unsettled financial markets, could undercut manufacturing through disruptions to the supply chain and put a brake on the strong economic growth.

There have also been concerns that the trade tensions could dampen business confidence and lead companies to shelve spending and hiring plans. But a $1.5 trillion fiscal stimulus, which helped to power the economy to a 4.1 percent annualized growth pace in the second quarter, is assisting the United States in navigating the stormy trade waters.

The Fed left interest rates unchanged on Wednesday while painting an upbeat portrait of both the labor market and economy. The U.S. central bank said “the labor market has continued to strengthen and economic activity has been rising at a strong rate.” It increased borrowing costs in June for the second time this year.

The moderation in employment gains and steady wage growth could ease concerns about the economy overheating, and keep the Fed on a gradual path of monetary policy tightening.

The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding the volatile food and energy components, increased 1.9 percent in June. The core PCE hit the central bank’s 2 percent inflation target in March for the first time since December 2011.

Manufacturing payrolls rose by 37,000 jobs last month after increasing by 33,000 in June. Construction companies hired 19,000 more workers after increasing payrolls by 13,000 jobs in June. Retail payrolls rebounded by 7,100 jobs last month after losing 20,200 in June.

Education and health services added 22,000 jobs last month, the fewest since October 2017, after boosting payrolls by 69,000 jobs in June. July’s slowdown in hiring reflected a loss of 10,800 education services jobs.

Transportation payrolls dropped by 1,300 jobs last month, with transit and ground transportation employment declining by 14,800 jobs. Utilities employment fell for a third straight month and the finance and insurance industry shed 9,400 jobs last month.

Government employment fell by 13,000 jobs in July.

(Reporting by Lucia Mutikani; Editing by Jonathan Oatis and Paul Simao)

U.S. inflation steadily firming; labor market strong

FILE PHOTO: People shop in Macy's Herald Square in Manhattan, New York, U.S., November 23, 2017. REUTERS/Andrew Kelly/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices barely rose in June, but the underlying trend continued to point to a steady buildup of inflation pressures that could keep the Federal Reserve on a path of gradual interest rate increases.

Other data on Thursday showed first-time applications for unemployment benefits dropped to a two-month low last week as the labor market continues to tighten. The Fed raised interest rates in June for a second time this year and has forecast two more rate hikes before the end of 2018.

“U.S. inflation continues to drift gradually higher in response to a nearly fully employed economy, with some nudging from tariffs,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “The Fed has every reason to pull the rate trigger again in October.”

The Labor Department said its Consumer Price Index edged up 0.1 percent as gasoline price increases moderated and the cost of apparel fell. The CPI rose 0.2 percent in May. In the 12 months through June, the CPI increased 2.9 percent, the biggest gain since February 2012, after advancing 2.8 percent in May.

Excluding the volatile food and energy components, the CPI rose 0.2 percent, matching May’s gain. That lifted the annual increase in the so-called core CPI to 2.3 percent, the largest rise since January 2017, from 2.2 percent in May.

Economists polled by Reuters had forecast both the CPI and core CPI rising 0.2 percent in June.

The Fed tracks a different inflation measure, which hit the U.S. central bank’s 2 percent target in May for the first time in six years. Economists expect the personal consumption expenditures (PCE) price index excluding food and energy will overshoot its target.

U.S. financial markets were little moved by the data.

In another report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 18,000 to a seasonally adjusted 214,000 for the week ended July 7, the lowest level since early May.

That suggests robust labor market conditions prevailed in early July. The economy created 213,000 jobs in June.

A tightening labor market and rising raw material costs are expected to push up inflation through next year. Manufacturers are facing rising input costs, in part because of tariffs imposed by the Trump administration on lumber, aluminum and steel imports.

So far, they have not passed on those higher costs to consumers. Fed officials have indicated they would not be too concerned with inflation overshooting its target.

Last month, gasoline prices rose 0.5 percent after increasing 1.7 percent in May. Food prices gained 0.2 percent, with food consumed at home rebounding 0.2 percent after falling 0.2 percent in May. Food prices were unchanged in May.

Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent last month after increasing by the same margin in May. But the cost of hotel accommodation fell 3.7 percent after rising 2.9 percent in May.

Healthcare costs advanced 0.4 percent, with the price of hospital services surging 0.8 percent. Healthcare prices gained 0.2 percent in May. Consumers also paid more for prescription medication last month.

Prices for new motor vehicles rose for a second straight month. There were also increases in the cost of communication, motor vehicle insurance, education and alcoholic beverages.

But apparel prices fell 0.9 percent after being unchanged in May. The cost of airline tickets declined for a third straight month. Prices of household furnishings and tobacco also fell last month.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Slowing gasoline price rises keep U.S. inflation in check

A woman shops in the Health & Beauty section of a Whole Foods in Upper St. Clair, Pennsylvania, U.S., February 15, 2018. Picture taken February 15, 2018. REUTERS/Maranie Staab

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices rose marginally in May amid a slowdown in increases in the cost of gasoline and the underlying trend continued to suggest moderate inflation in the economy.

The Labor Department’s inflation report was published ahead of the start of the Federal Reserve’s two-day policy meeting on Tuesday. Steadily rising inflation and a tightening labor market are expected to encourage the U.S. central bank to raise interest rates for a second time this year on Wednesday.

The Consumer Price Index increased 0.2 percent last month, also as food prices were unchanged. That followed a similar gain in the CPI in April. In the 12 months through May, the CPI increased 2.8 percent, the biggest advance since February 2012, after rising 2.5 percent in April.

Excluding the volatile food and energy components, the CPI rose 0.2 percent, supported by a rebound in new motor vehicle prices and a pickup in the cost of healthcare, after edging up 0.1 percent in April. That lifted the year-on-year increase in the so-called core CPI to 2.2 percent, the largest rise since February 2017, from 2.1 percent in April.

Annual inflation measures are rising as last year’s weak readings fall from the calculation. Last month’s increase in both the CPI and core CPI was in line with economists’ expectations.

The Fed tracks a different inflation measure, which is just below its 2 percent target. Economists are divided on whether policymakers will signal one or two more rate hikes in their statement accompanying the rate decision on Wednesday.

The dollar held gains versus a basket of currencies immediately after the data before falling to trade slightly lower. U.S. Treasury yields were trading lower while U.S. stock index futures were slightly higher.

FOOD PRICES

The Fed’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy, rose 1.8 percent on a year-on-year basis in April, matching March’s increase.

Economists expect the core PCE price index will breach its 2 percent target this year. Fed officials have indicated they would not be too concerned with inflation overshooting the target.

Last month, gasoline prices increased 1.7 percent after surging 3.0 percent in April. Food prices were unchanged in May after rising 0.3 percent in the prior month. Food consumed at home fell 0.2 percent amid declines in the cost of meat, eggs, fruits and vegetables.

Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent in May after a similar gain in April.

Healthcare costs gained 0.2 percent last month after nudging up 0.1 percent in April. Prices for new motor vehicles rose 0.3 percent after sliding 0.5 percent in April.

Prices for used cars and trucks fell 0.9 percent after tumbling 1.6 percent in April. Airline fares declined 1.9 percent in May after dropping 2.7 percent in the prior month. Prices for apparel and recreation were unchanged in May.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. job growth surges, unemployment rate falls to 3.8 percent

FILE PHOTO: Job seekers line up to apply during "Amazon Jobs Day," a job fair being held at 10 fulfillment centers across the United States aimed at filling more than 50,000 jobs, at the Amazon.com Fulfillment Center in Fall River, Massachusetts, U.S., August 2, 2017. REUTERS/Brian Snyder/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8 percent, pointing to rapidly tightening labor market conditions, which could stir concerns about inflation.

The closely watched employment report released by the Labor Department on Friday also showed wages rising solidly, cementing expectations that the Federal Reserve will raise interest rates this month. The bullish report also raises the possibility that the economy could overheat.

Overall, the U.S. economy looks strong,” said Paul Ashworth, chief economist at Capital Economics in Toronto. “In that environment, we still expect the Fed to hike interest rates an additional three times this year.”

Nonfarm payrolls increased by 223,000 jobs last month as warm weather boosted hiring at construction sites. There were also big gains in retail and leisure and hospitality payrolls. The economy created 15,000 more jobs than previously reported in March and April.

Last month’s one-tenth of a percentage point drop in the unemployment rate pushed it to a level last seen in April 2000. The jobless rate is now at a level that the Fed forecast it would be at by the end of this year.

Average hourly earnings rose eight cents, or 0.3 percent last month after edging up 0.1 percent in April. That lifted the annual increase in average hourly earnings to 2.7 percent from 2.6 percent in April.

The strong employment report added to a string of upbeat economic data, including consumer spending, industrial production and construction spending, that have suggested economic growth was regaining speed early in the second quarter after slowing at the beginning of the year.

The strength comes even as the stimulus from a $1.5 trillion income tax cut package and increased government spending is yet to filter through the economy. Renewed fears of a trade war after the Trump administration imposed tariffs on steel and aluminum imports from Canada, Mexico and the European Union, however, cast a dark cloud over the economic outlook.

Inflation is running just below the Fed’s 2.0 percent target. The U.S. central bank increased borrowing costs in March and forecast at least two more rate hikes for this year.

After the employment report, traders increased bets that the Fed would raise interest rates four times this year. U.S. Treasury yields rose and the dollar gained versus a basket of currencies. Stocks on Wall Street were trading higher.

BROAD JOB GAINS

Economists polled by Reuters had forecast nonfarm payrolls increasing by 188,000 jobs last month and the unemployment rate steady at 3.9 percent.

Monthly job gains have averaged about 179,000 over the last three months, more than the roughly 120,000 needed to keep up with growth in the working-age population. Though the labor market is viewed as being close to or at full employment, there is still some slack remaining.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 62.7 percent last month from 62.8 percent in April. It has declined for three straight months.

Still, the labor market is getting tighter. A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell to 7.6 percent last month, the lowest since May 2001, from 7.8 percent in April.

With job growth expected to slow as employers struggle to find qualified workers, economists expected wage growth will pick up significantly.

The Fed’s latest Beige Book report of anecdotal information on business activity collected from contacts nationwide showed labor market conditions remained tight across the country in late April and early May. The Fed said contacts continued to report difficulty filling positions across skill levels.

There were notable shortages of truck drivers, sales personnel, carpenters, electricians, painters, and information technology professionals, the central bank said in its report published on Wednesday.

Job gains in May were across all sectors. Construction payrolls increased by 25,000 after rising by 21,000 jobs in April. Construction employment fell in March for the first time in eight months.

Manufacturers added another 18,000 jobs last month on top of the 25,000 created in April. Further gains are likely, with a survey from the Institute for Supply Management on Friday showing a pickup in factory activity in May. But some manufacturers said the steel tariffs were pushing up prices.

Government payrolls increased by 5,000, reversing April’s 3,000 drop. Retailers boosted employment by 31,100 jobs last month. Employment in the leisure and hospitality sector increased by 21,000 jobs.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)