U.S. Hiring Stayed Strong in June Despite Trade Strains

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Workers will find the modest increase in hourly earnings — which falls a nose behind some measures of inflation — disappointing. But it does undercut the argument that the economy may be revving too fast.

The combination of middling pay raises and a bump up in the jobless rate should “take a little bit of pressure off the Federal Reserve to step up the pace of tightening,” said Jim O’Sullivan, chief economist of High Frequency Economics, referring to the central bank’s debate over how quickly to raise benchmark interest rates.

Over the past three months, monthly payroll gains have averaged 211,000, and hiring has been running ahead of growth in the labor force. “There’s a gap there,” Mr. Sullivan noted, and without a steep and persistent plunge in hiring, “the unemployment rate is going to keep falling.”

The June report caps a string of encouraging economic reports. Many estimates for growth in the second quarter are bouncing above 4 percent. The manufacturing sector buzzed with activity last month, and spending on construction rose. New jobless claims are dragging along at historically low levels. And many consumers displayed their confidence in the economy by kicking off the summer with a new car purchase.

Anxieties over a harmful trade war, however, continue to cast shadows as $34 billion in additional tariffs on China went into effect on Friday, and the Chinese said they would retaliate. “They’re playing with fire, really,” Mr. O’Sullivan said of the Trump administration’s trade policies. The jobs report over all was very encouraging, he said, though “we could do with a scare in these numbers to force trade negotiations along.”

Hiring in the manufacturing sector nonetheless continued its surge, with 36,000 jobs added in June. Business and professional services as well as health care also had strong showings, while the retail sector slumped, losing 22,000 jobs.

The latest surveys of business owners around the country have been full of comments expressing dismay with the uncertainty generated by tariffs, whether newly imposed or threatened.

Last week, General Motors said that tariffs could lead to “less investment, fewer jobs and lower wages.” The motorcycle manufacturer Harley-Davidson, based in Wisconsin, announced it would shift some production overseas to sidestep retaliatory tariffs imposed by European countries.

The United States Chamber of Commerce, warning that escalating tariffs would result in “lost sales and ultimately lost jobs here at home,” published a state-by-state breakdown this week showing exports that could be harmed along with estimates of the number of jobs that depend on global trade.

And on Thursday, the minutes from last month’s meeting of Federal Reserve policymakers were released. “Most participants noted that uncertainty and risks associated with trade policy had intensified,” the Fed said, and it was “concerned that such uncertainty and risks eventually could have negative effects on business sentiment and investment spending.”

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Crews working on a tunnel project in Roanoke County, Va. To retain workers as well as attract new ones, employers say they are increasing pay, sweetening benefits packages and trying to create an appealing work culture. Credit Heather Rousseau/The Roanoke Times, via Associated Press

Chasing Higher Wages

As the jobless rate falls, employers’ complaints about their inability to find qualified, reliable workers mount.

“There’s more jobs than there are people available for jobs — at every level,” said Joe Galvin, chief research officer of Vistage, an association of small-business owners and executives. In a Vistage survey last month, an overwhelming share of employers spoke of their frustration in finding people to fill openings on the factory floor and in the executive suite, Mr. Galvin said.

To retain workers as well as attract new ones, employers say they are increasing pay, sweetening benefits packages and trying to create an appealing work culture.

Yet as the jobs report shows, average pay raises have been relatively measly considering the demand for labor. Workers, particularly in lower-wage sectors, have other complaints. Many employers limit hours to avoid paying benefits like health insurance. Work shifts frequently change with little notice, and wage increases are still insufficient to cover living costs. Stability and security are often scarce.

Child care, for instance, is an industry known for high turnover rates, low pay and a predominance of female workers.

“We are always looking for job candidates,” said Gigi Schweikert, president and chief operating officer of Lightbridge Academy, which operates child care facilities. “While many industries can move toward automation,” she said, “you can’t in caring for young children.”

The company is moving toward a $15-an-hour minimum over three years, Ms. Schweikert said. “We want to be more aggressive, but we can’t price parents out of the market,” she said. “We can only increase that parent tuition to a point where parents can afford it.”

Higher-wage earners are also in demand. DocuSign, an electronic-signature company with more than $500 million in annual revenue, added 100 sales, engineering and technical workers last month and intended to hire another 500 over the next six months, said Joan Burke, the company’s chief people officer.

“You just cannot be in this game without being competitive,” Ms. Burke said of salaries.

For most workers, the biggest pay gains are accompanied by a job change.

Andrew Chamberlain, the chief economist at Glassdoor, a jobs listing website, said he had noticed a weakening in the retail sector. “There’s been a precipitous decline in postings on Glassdoor in the past two months,” he said. (Most job losses from the demise of Toys “R” Us will probably show up in July.)

Still, announced job cuts in the sector have slowed substantially in the second quarter compared with the first, according to Challenger, Gray & Christmas, an outplacement service.

Looking Ahead

Heightening trade tensions are not the only risks.

Mr. Chamberlain, like most other economists, warns that the economic high has been pumped up in part by deep tax cuts financed by ballooning debt. “We are in a miniboom being fueled by a tax stimulus in 2018 that’s not going to last,” he said.

Oxford Economics, an economic research firm, noted in its newsletter that with sluggish wage increases, consumers over the past couple of years had dipped into savings to finance spending. That habit can be particularly risky for lower-income families who could be easily knocked off course by a surge in energy prices or a large unexpected medical bill.

Correction: July 6, 2018

An earlier version of this article misstated the value of American tariffs on Chinese goods that went into effect on Friday. It is $34 billion, not $34 million.

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