US wage growth strong even as job market slows

Quickview: The November US jobs report showed that fewer jobs were added than expected, but wage growth remains strong.



Janet Mui
Global Economist, Cazenove Capital

The US November labour data points to a very tight employment market. Softer non-farm employment than expected was disappointing, but without an influx of labour supply the US unemployment rate remained at a 48-year low of 3.7% for the third successive month.

The tight balance of supply and demand kept wage growth at the fastest pace in nearly a decade at 3.1% year-on-year.

The non-farm payroll did rise in November but at the weakest pace in a year. The weakness in hiring in November was led by sectors including construction and mining, probably impacted by the slowdown in housing activity and the plunge in oil prices. There were also pockets of softness in service employment.

Despite the escalation in trade tensions, manufacturing jobs increased by a solid 27,000 in November, the best since April this year. Announced plant closings and large scale lay-offs by General Motors may hit the sector in the near-term.

Average hourly earnings continued to grow at +3.1% year-on-year, the fastest pace in a decade. This is clear evidence that the tight labour market is generating more wage pressures. As US inflation slows, due largely to a fall in energy prices, consumers are enjoying faster gains in inflation-adjusted take-home pay, which is positive for household spending.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.


Janet Mui
Global Economist, Cazenove Capital


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