An interest rate rise in the US looks a near certainty after another solid month of job creation in the world’s largest economy.
In a boost to Donald Trump as he prepares to move into the White House next month, government figures showed the unemployment rate dropped to a nine-year low in November and employers hired new workers at a faster pace as they banked on a rebound in economic growth.
Behind the upbeat headline figures were signs that some US workers have yet to feel the gains of an improving labor market as wages fell and as many Americans gave up looking for work.
But that is unlikely to deter policymakers on the Federal Reserve’s Open Market Committee (FOMC) from raising interest rates at their meeting later this month, economists said.
“On the back of largely positive economic data throughout autumn, a rate rise is widely expected for the December meeting of the FOMC. The positive employment data from November are probably the last piece of confirmation the members of the committee were waiting for,” said Kay Daniel Neufeld at the consultancy the Centre for Economics and Business Research.
The final US jobs report of 2016 recorded 178,000 new jobs added, close to economists’ expectations of 180,000 for November. The unemployment rate dropped to 4.6% from 4.9% in October and was the lowest since August 2007, before the global financial crisis struck.
Deputy labor secretary Chris Lu said that President-elect Trump was inheriting a far better economy than the one outgoing president Barack Obama had inherited from George W Bush, but “the unfinished business was wages”.
“I think the working-class and middle-class Americans who voted for the president-elect are expecting not only for their jobs to stay here but for their wages to go up, and we know what the policy solutions are,” Lu told the Guardian.
“The tighter job market is pushing up wages as businesses compete for workers, but the process is gradual,” he said.
The figures from the US labor department showed hourly wages declined by 3 cents an hour to $25.89.
Augustine Faucher, analyst at the bank PNC, called the wage dip “a big soft spot”.
Faucher also noted the drop in unemployment was not entirely good news. “It fell in part because of a contraction in the labor force of 226,000, with the labor force participation rate declining to 62.7%, its lowest since June,” he said.
James Smith, economist at the bank ING, said there were reasons to think the wage dip was a one-off and that pay would soon rise again.
“That weak wage figure will probably raise a few eyebrows among some of the more dovish Fed voters. But it would have had to have been a really disastrous jobs report to have derailed the FOMC’s plans to hike in December,” he said.
“In fact, assuming that the latest wage growth figure was a blip, we still think that the labor market is strong enough to support two hikes from the FOMC next year.”
Trump secured the presidency after campaigning on a platform of anti-globalization and pledges of job creation for US workers. He also vowed to increase spending on infrastructure, something many economists believe will give the US economy a significant boost next year.
If the billionaire Republican delivers on his spending promise, inflation is also viewed as likely to pick up, which would push the US central bank into more rate rises next year.
Fed policymakers, investors and analysts alike would now be closely watching the new president to gauge how much of his campaign talk would become policy, said Nancy Curtin, chief investment officer at Close Brothers Asset Management.
“If, as expected, we see a swing towards fiscal stimulus, this may give the Fed greater scope to hike rates further in 2017. Fed decision making will no longer be solely data dependent, but policy dependent also,” said Curtin.
The prospect of higher inflation has also raised fears for living standards being squeezed further if wage growth does not keep pace with costs.
Many workers still report they cannot make ends meet even with multiple jobs.
“I take one day off from home health, but when I do that I do deliveries all day long,” said April Shabazz of Merriam, Kansas, who protested with Fight for 15 workers this week as part of calls for fairer minimum wages nationwide.
“I’ve been in home health since I was 15, so 30 years,” Shabazz said, adding that she works every day of the week, sometimes as a delivery driver for GrubHub, sometimes as a home healthcare worker.
“The cost of living is going up, but our pay is not going up,” she told the Guardian.