Payrolls rise 201,000, average hourly earnings up 2.9%

Washington

US JOB gains rebounded by more than forecast in August and wages unexpectedly registered their biggest advance of the expansion, keeping the Federal Reserve on track to lift interest rates this month and possibly another time this year.

Non-farm payrolls rose 201,000 after a downwardly revised 147,000 advance, a Labor Department report showed on Friday.

The median estimate of analysts surveyed by Bloomberg called for a gain of 190,000 jobs.

Average hourly earnings increased 2.9 per cent from the year before, while the jobless rate was unchanged at 3.9 per cent, still near the lowest since the 1960s.

Robust hiring and lower taxes have boosted consumer spending and kept the job market near full employment, giving the Fed the go- ahead on raising rates this month.

While investors have seen fewer hikes than policy makers are expecting through the end of 2019 - amid an escalating trade war, turmoil in emerging markets and the risk of a yield-curve inversion - the latest wage figures could narrow the gap in the outlook between the Fed and markets.

Jennifer Lee, senior economist at BMO Capital Markets, said before the report: "The labour market is still super tight."

Revisions subtracted a total of 50,000 jobs from payrolls in the previous two months, according to the figures, resulting in a three-month average of 185,000.

The details across industries showed manufacturing payrolls fell by 3,000 in August, breaking an almost year-long streak of solid gains and missing the median estimate for a 23,000 increase.

Construction added 23,000 jobs.

Service providers increased payrolls by 178,000 workers, a three-month high.

Gains were led by education and health services at 53,000 jobs, professional and business services with 53,000 and wholesale trade at 22,400.

Government payrolls fell by 3,000. Private employment rose by 204,000, compared with a median estimate of 194,000.

The payroll gain ends a seven-year streak where the first reading for August has been below the median analyst estimate.

The August figure has been revised upward in six of the past seven years.

Average hourly earnings rose 0.4 per cent from the prior month following a 0.3 per cent gain, the report showed.

The annual gain followed a 2.7 per cent advance in July.

A separate measure, average hourly earnings for production and non-supervisory workers, increased 2.8 per cent from a year earlier, after a 2.7 per cent gain.

The average work week for all private employees was unchanged at 34.5 hours in August.

The lacklustre pace of wage gains ahead of the latest data has become a contentious issue for Republicans and Democrats heading into mid-term congressional elections in November.

The White House issued a report on Wednesday, arguing that compensation looks better when accounting for factors such as employment benefits, retiring baby boomers and this year's tax cuts.

The jobless rate remains well below Fed estimates of levels sustainable in the long run. The latest figure reflects a decrease of 46,000 unemployed people in August and a 423,000 drop in the number of people with jobs.

That lowered the participation rate, or share of working-age people in the labour force, to 62.7 per cent from 62.9 per cent the prior month.

The employment-population ratio, another broad measure of labour-market health that central bankers like to watch, fell to 60.3 percent from 60.5 per cent.

Another measure showed diminishing labour-market slack. The U-6, or underemployment rate, fell to 7.4 per cent from 7.5 per cent.

That gauge includes part-time workers who would prefer a full-time position and people who want a job but aren't actively looking. BLOOMBERG