US job growth seen picking up, wage growth likely moderate
WASHINGTON (Reuters) - US job growth likely accelerated in May as warmer weather boosted hiring at construction sites, but wage gains are expected to have remained marginal, pointing to moderate inflation pressures in the economy.
Nonfarm payrolls probably increased by 188,000 jobs last month, according to a Reuters survey of economists. The economy added 135,000 and 164,000 jobs in March and April, respectively.
“Poor weather had been a negative factor for employment growth in both March and April,” said Ellen Zentner, chief economist at Morgan Stanley in New York. “There should be a rebound from this adverse impact in May. In particular, we look for a robust gain in construction jobs.”
Average hourly earnings are expected to have risen 0.2 percent last month after edging up 0.1 percent in April. That would lift the annual increase in average hourly earnings to 2.7 percent from 2.6 percent in April.
A string of strong economic data, including consumer spending and industrial production, had fanned fears of inflation against the backdrop of a $1.5 trillion income tax cut package and increased government spending. Inflation is running just below the Federal Reserve’s 2.0 percent target.
Monthly job gains have averaged about 200,000 this year, more than the roughly 120,000 needed to keep up with growth in the working-age population. The unemployment rate is forecast unchanged at a near 17-1/2-year low of 3.9 percent.
The closely watched employment report on Friday will probably cement expectations that the Fed will raise interest rates in June. The US central bank increased borrowing costs in March and forecast at least two more rate hikes for this year.
But much depends on financial market conditions, which have tightened in recent days following a political crisis in Italy and renewed fears of a trade war after the Trump administration imposed tariffs on steel and aluminum imports from Canada, Mexico and the European Union.
“June is a done deal. The bigger question is will they raise a total four times this year or three?” said Mark Doms, a senior economist at Nomura in New York.
“Given the uncertainty in Europe and maybe to a lesser extent the uncertainty over trade policy, we think that the Fed will not signal that they are going to hike four times at the June meeting.”