Hiring fuels durable, sluggish US economy

Companies have trouble finding qualified workers

WASHINGTON — Hiring by U.S. employers was slower but steady in August, and hourly pay jumped — trends that should sustain the U.S. economy’s record-long expansion in the coming months.

Yet with the economy still under threat from a weak global economy and President Donald Trump’s trade war with China, Chairman Jerome Powell made clear Friday that the Federal Reserve is poised to cut interest rates.

The government’s jobs report Friday showed that U.S. employers, for now, are still adding jobs at a modest pace. Hiring did slow to 130,000 jobs in August, below the average pace of the past six months.

The unemployment rate stayed at 3.7% for a third straight month, near the lowest level in five decades. And more Americans entered the workforce in August, a positive development that increased the proportion of adults who are either working or seeking work to its highest level since February.

Still, the impact of the trade war, which has yet to be fully felt by consumers and retailers, could soon inflict damage. The Trump administration has just imposed 15% tariffs on about one-fifth of Chinese imports and plans to impose another such round of import taxes on Dec. 15.

All those tariffs will fall on consumer goods ranging from clothes and toys to electronics and sporting goods, likely raising prices for shoppers and shrinking retailers’ narrow profit margins.

Trump’s previous import taxes had fallen mainly on parts and components used by manufacturers. The additional costs imposed by those tariffs and the threats of additional ones have caused businesses to cut back their spending. In addition, retaliatory tariffs from China have cut into U.S. exports.

All that has left consumers as the most important driver of U.S. economic growth. And for now, Americans are still spending. Consumer spending rose in the April-June quarter by the most in five years and also increased at a healthy clip in July. Average hourly pay rose 11 cents in August to $28.11, up 3.2% from a year earlier, easily ahead of inflation.

“With slower, but still-solid job gains and good wage growth, households will continue to spend,” Gus Faucher, chief economist at PNC, said. “The U.S. economy should avoid recession.”

Over the past six months, employers have added an average of 150,000 jobs, down from an average of 223,000 last year. Even so, job gains at that pace are enough to lower the unemployment rate over time.

Last month’s job gains were boosted by the temporary addition of 25,000 government workers for the 2020 Census. Excluding all government hiring, the economy added just 96,000 jobs in August, the fewest since May.

One reason hiring is slipping is that with the unemployment rate so low, companies are having a harder time finding qualified workers. The solid wage gain in August suggests that more businesses are deciding that they need to offer higher pay to attract and keep employees.

“That’s a sign we’re in pretty good shape here,” said Drew Matus, an economist at Metlife Investment Management.

Speaking at an event in Switzerland, Powell said he thought the U.S. consumer is in good shape and that the job market was “strong.”

Trade fights are causing “some uncertainty,” Powell added. The Fed is monitoring economic data, he said, and will “act as appropriate to sustain the expansion.”