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US jobs growth surges but wage growth remains tepid
US job growth rebounded strongly in June, but moderate wage gains and mounting evidence that the economy was slowing sharply could still encourage the Federal Reserve to cut interest rates this month.
The Labor Department's closely watched employment report on Friday suggested May's sharp slowdown in hiring was probably a fluke. Lack of concrete progress in resolving an acrimonious trade war between the United States and China, however, means the bar could be very high for the Federal Reserve not to lower borrowing costs at its July 30-31 policy meeting.
The US central bank last month signalled it could ease monetary policy as early as this month citing low inflation as well as growing risks to the economy from an escalation in trade tensions between Washington and Beijing.
President Donald Trump and Chinese President Xi Jinping last week agreed to a trade truce and a return to talks. Mr Trump has said he is in "no hurry" to make a deal and on Wednesday accused China and Europe of "playing big currency manipulation game and pumping money into their system in order to compete with USA." The trade fight has undercut business confidence, leading to a downturn in equipment spending and manufacturing.
Nonfarm payrolls increased by 224,000 jobs last month, the most in five months, the government said. The economy created 11,000 fewer jobs in April and May than previously reported.
Economists polled by Reuters had forecast payrolls rising 160,000 jobs in June.
Job growth averaged 172,000 per month in the first half.
Hiring has cooled from an average of 223,000 jobs per month in 2018. The pace, however, remains well above the roughly 100,000 needed to keep up with growth in the working age population.
The economy, which has expanded a record 10 years, has shifted into lower gear as the stimulus from last year's massive tax cuts and more government spending fizzles. The Atlanta Fed is forecasting gross domestic product rising at a 1.3 per cent annualised rate in the April-June quarter. The economy grew at a 3.1 percent pace in the first quarter.
The trend in wage growth has slowed from late last year when wages were rising at their fastest rate in a decade, pointing to moderate inflation. Average hourly earnings rose six cents or 0.2 per cent after gaining 0.3 per cent in May. That kept the annual increase in wages at 3.1 per cent for a second straight month.
The unemployment rate rose one-tenth of a percentage point to 3.7 per cent as people entered the labour market. Some of the recent drop in the jobless rate has been because of people leaving the labour market.
A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, rose to 7.2 per cent in June from 7.1 per cent in May.
Job growth has slowed in part as employers struggle to find qualified workers. There are about 7.4 million job openings.
Hiring picked up nearly across all sectors in June, though retail payrolls contracted for a fifth straight month. REUTERS