WASHINGTON (Reuters) – US companies are expected to maintain a solid hiring pace in November while raising wages for workers. This suggests that the economy is still strong enough to raise the Federal Reserve in 2019 as well.
FILE PHOTO – Job seekers line up at a job fair run by a Halliburton oil company at the MCM Grande Fundome hotel in Odessa, Texas, on July 1
The Labor Department will release its monthly closely watched employment report Friday against a backdrop of a sharp sell-off on Wall Street and a partial reversal of the US yield curve, which fears the recession.
Equities were largely adversely affected by uncertainty as to whether a 90-day ceasefire agreed by President Donald Trump and President Xi Jinping during the weekend will sustainably ease trade tensions between the world's two largest economies.
According to a Reuters survey of economists, the number of non-farm salaries last month probably increased by 200,000, after rising by 250,000 in October. The unemployment rate is expected at a 49-year low of 3.7 percent.
Average hourly earnings rose 0.3 percent in November, after rising 0.2 percent in October. Thus, the annual increase in wages would be 3.1 percent, which corresponds to the jump of October. This was the largest increase since April 2009.
A strong employment report would ease concerns about the health of economies and increase the likelihood that the Fed will raise interest rates further than once next year.
"With the Fed now very data-dependent, stronger data should give more confidence to the market that the Fed will continue to rise in 2019," said Veronica Clark, an economist at Citigroup in New York. "We believe the Fed will go twice next year."
Financial markets are pricing in a rate hike against the Fed in 2019, compared with expectations for possibly two rate hikes the previous month, according to the CME Group's FedWatch program. The US Federal Reserve is expected to increase funding costs on 18 and 19 December for the fourth time this year.
Fed Chairman Jerome Powell appeared to be a sign that the central bank's three-year tightening period was drawing to a close last month, saying that the benchmark rate was now "just below" estimates of a healthy, healthy level Economy neither cools nor promotes.
The minutes of last November's November policy meeting, released last week, showed that almost all officials felt that a further rate hike "is likely to be justified fairly soon", but also a debate about it began when further increases should be interrupted.
THE AMAZON EFFECT
The wage growth could surprise upwards after the online retailer Amazon.com Inc ( AMZN.O ) set its minimum wage for US employees at $ 15 an hour last month In view of the worsening of labor market conditions.
Weak October data on the real estate market, investment in equipment by companies and a ten-year increase in the trade deficit have fueled fears that the economy will slow.
The growth forecasts for the fourth quarter are annualized at around 2.7 percent. The economy grew by 3.5 percent in the third quarter.
Employment growth averaged 212,500 per month this year, twice as high as around 100,000 to sustain the growth of the working-age population. However, there are signs of possible speed variations. The number of Americans applying for unemployment benefits is close to eight-month highs.
General Motors ( GM.N ) has announced plans to mine up to 15,000 jobs in North America next year, which will affect some assembly plants in the United States.
The labor market is now on a solid footing and will support the economy at least until the beginning of 2019, when growth is expected to slow significantly as stimulus from the Trump government's tax cut package slips $ 1.5 trillion.
"Even though layoffs are starting to cool in some areas, the fact that many industries are reporting labor shortages and vacancies suggests that the total payroll could continue to rise," said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.
The hiring last month was likely in all sectors. An early Thanksgiving holiday is expected to increase employment in the retail sector, while transport and warehousing pay levels are likely to have increased due to seasonal attitudes.
However, an unusually cold November was likely to slow down the cessation of construction sites after companies hired 30,000 workers in October.
Employment in manufacturing is expected to increase by 20,000 last month, after rising 32,000 in October.
coverage by Lucia Mutikani; Editing by Tomasz Janowski