Job growth in the U.S. accelerated during October after disruptions from hurricanes in September, but wages increased at their slowest pace on an annualized basis for over 18 months in a new sign that inflation is likely to remain benign.
Employers added 261,000 new jobs in October as over 106,000 workers from the hospitality and leisure sector returned to work, said the Labor Department Friday in its monthly jobs report.
That was the biggest gain in nonfarm payrolls since July of 2016, but below expectations of economists expecting an increase of more than 310,000 jobs.
Data for new payrolls in September was revised to indicate an increase of 18,000 jobs rather than a drop of 33,000 as were previously reported.
The Trump administration, which is actively pushing a package of cuts in taxes backed by Republicans, trumpeted the gains in payrolls, as President Donald Trump tweeted, “Jobs, Jobs, Jobs!”
However, Democratic House Leader Nancy Pelosi said that the jobs report showed that Americans were being denied larger paychecks by the Republicans’ agenda of billionaires first.
The average per hour earnings dropped 1 penny during October, leaving them as a percentage unchanged, which was due in part to the return of hospitality and leisure workers that earn less.
Wages increased by 0.5% during September, and were up by 2.4% in the basis of year on year during October, the smallest increase since February of 2016, after an advance of 2.8% during September.
The acceleration of job growth in October reinforced the assessment by the Federal Reserve Wednesday that the U.S. labor market continues to strengthen. The sluggish data for wages did not change expectation the Fed would increase interest rates during December.
The central bank in the U.S. has increased interest rates twice in 2017.
Tepid growth in wages supports a view of inflation continuing to stay below the 2% target of the Fed. Should growth in wages remain sluggish, it would be hard, say economists, for the Fed policymakers to increase rates three times during 2018 as they anticipate at this time.
Although the rate of unemployment dropped to close to a low of 17 years in October to 4.1%, from September’s 4.2%, it was due to the labor force dropping over 765,000 after a surprise increase in September of 575,000.
The moderation for job growth during September was said to be caused by two hurricanes that hit the U.S. during September and left mainly lower-paid industries such as hospitality and leisure, with large amounts of unemployed workers.