United States weekly jobless claims drop to near 49-year low

Fredrick Soto
October 8, 2018

Andrew Grantham, senior economist at CIBC described September's employment report as "solid", despite the weaker than expected headline number.

The tightening of the labor market is leading to a more visible acceleration in wages.

While Florence probably affected the figures during the month, hiring may settle into a more sustainable pace after a strong run that has pushed the economy closer to full employment.

The US 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 number of Americans filing for unemployment benefits fell to a near 49-year low last week, pointing to sustained labour market strength, which should continue to underpin economic growth.

According to the Commerce Department's most recent data, consumer spending, which accounts for two-thirds of the USA economy, slowed down slightly in August, while the savings rate held steady at 6.6 percent.

Gold prices were modestly higher ahead of the report and have managed to hold on to gains as the market sees little movement in initial reaction.

- 134,000 jobs were added last month.

Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, dropped 0.2 percent in August instead of rising 0.1 percent as reported last month.

Economists say there is no indication the labor market is expected to weaken anytime soon. September's storm and catastrophic flooding in the Carolinas likely preventing some businesses from bringing new workers on, and some people from getting to their first day on the job. Bond yields spiked following the jobs report, with the benchmark 10-Year Treasury hitting 3.24 percent - its highest level in more than seven years. Many forecasters predict it will decline even more in the months to come.

The data showed manufacturing jobs continuing to multiply in September, with 18,000 added, reflecting a gain in durable goods industries.

Hourly wages rose 2.8 percent in September from a year ago, a slight drop from August's 2.9 percent year-over-year growth.

Beyond the payroll numbers and the jobless rate, the real news was that wages continued their steady but moderate rise.

Many major employers announced pay increases in recent months, but those have yet to significantly move the needle nationally on average hourly earnings, which haven't topped 3 percent growth yet in this expansion. 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. The Trump administration has imposed tariffs on imported steel and aluminum as well as on roughly half of China's imports to the United Sates.

Economists polled by Reuters had forecast the overall trade deficit swelling to US$53.5 billion in August.

The unemployment rate for those with a high school degree and no college attendance hit 3.7 per cent, the lowest since April 2001.

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