Employment growth in the US has remained strong throughout 2016 despite ‘subdued’ economic growth, making a Federal Reserve rate hike likely for December, according to NAB Group Economics.
September saw US non-farm employment increase by 156,000, resulting in an unchanged year-on-year growth in unemployment at 1.7 per cent, NAB Group Economics senior economist Antony Kelly said.
Mr Kelly did however note unemployment had grown in September to 5.0 per cent from 4.9 per cent in August, adding that “it was at this level back in October 2015, so [the US has] gone almost a whole year with no improvement”.
This evening out seen in the unemployment rate is the result of “an upturn in workforce participation”, Mr Kelly said, indicating the labour market is healing.
“While longer-term demographic changes point to declining participation, the recent uptick reverses some of the decline that resulted from the 2007-2009 recession,” he explained.
Annual non-farm average hourly wages have also seen a small acceleration, which Mr Kelly said was further evidence of a pick-up in wages in the face of low productivity growth.
Additionally, Mr Kelly commented that “inflation is also showing signs of edging back up”, with core inflation measures climbing 1.7 per cent year-on-year.
“With the labour market still making solid progress and inflation - on a core basis - not that far from the Fed’s 2 per cent long-term target, we still expect the Federal Reserve to increase the federal funds rate target range by 25 basis points in its December meeting,” Mr Kelly said.
Earnings are expected to be under significant pressure over the next financial year. ...