WASHINGTON — U.S. private employers maintained a solid pace of hiring in August despite recent global financial market turmoil, suggesting that labor market momentum likely remains strong enough for the Federal Reserve to consider an interest rate hike this year.þþThe ADP National Employment Report on Wednesday showed private payrolls increased 190,000 last month. While that was below economists' expectations for a gain of 201,000 jobs, it was a step-up from the 177,000 positions created in July.þþÿJob growth remains strong and broad-based, except in the energy industry, which continues to shed jobs,ÿ said Mark Zandi, chief economist of Moody's Analytics in West Chester, Pennsylvania.þþThe ADP report, which is jointly developed with Moody's Analytics, was published ahead of the government's more comprehensive employment report to be released on Friday.þþAccording to a Reuters survey of economists, nonfarm payrolls likely increased by 220,000 jobs in August after rising 215,000 in July. There is, however, a risk of a weaker number as the first print of August payrolls has tended to be weaker in the last several years before being revised higher.þþBut some economists were encouraged by the ADP report, which showed job gains in all sectors, except in the energy industry.þþÿADP does not show the same initial under-reporting bias in the initial release of the August data as payroll data from the (government) appear to display,ÿ said John Ryding, chief economist at RDQ Economics in New York.þþÿThis apparent consistent trend in ADP payroll gains would reassure us that the trend in employment was little changed in August in the event that payroll growth drops noticeably below 200,000 in Friday's report.ÿþþThe unemployment rate is forecast to tick down to 5.2 percent from 5.3 percent in July. The August employment report would be released less than two weeks before the Fed's Sept. 16-17 policy meeting.þþThe chances of an interest rate hike this month have been diminished by a global stock market sell-off in the wake of poor economic data from China. In, addition, U.S. factory activity slowed to a more than two-year low in August, with some economists citing the financial markets turbulence as a factor.þþHowever, Fed Vice Chairman Stanley Fischer told CNBC last week it was too early to decide whether the stock market rout had made a rate hike this month less compelling.þþPrices for U.S. Treasury debt were trading lower, while the dollar was at session highs.þþSTRONG DOMESTIC ACTIVITYþþÿOutside of manufacturing, the domestic activity data is very strong,ÿ said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto. ÿBut Fed officials are clearly worried about an economic slowdown in China, commodity prices are lower, and there is little evidence of any marked pick-up in either wage growth or core inflation.ÿþþIn a second report, the Labor Department said nonfarm productivity increased at its strongest pace in 1-1/2 years in the second quarter, keeping wage inflation subdued for now.þþThe government revised productivity to show it rising at a 3.3 percent annual rate, the quickest since the fourth quarter of 2013, instead of the 1.3 percent pace reported last month.þþEconomists had forecast productivity, which measures hourly output per worker, being revised up to a 2.8 percent annual growth pace. Productivity contracted at a 1.1 percent rate in the first quarter.þþThe government last week revised second-quarter gross domestic product to show GDP expanding at a 3.7 percent annual pace instead of the 2.3 percent rate it had initially estimated.þþBut the trend in productivity remains weak. Productivity rose 0.7 percent from a year ago instead of the 0.3 percent increase reported last month.þþGrowth in productivity is an important determinant of theþþeconomy's non-inflationary speed limit.þþThough the second-quarter bounce back is dampening wage pressure for now, the weak trend in productivity suggests the economy's growth potential could be lower than the 1.5 percent to 2.0 percent pace that economists have been estimating.þþThat would imply the spare capacity in the economy is being squeezed out more quickly than thought and that inflationþþpressures may take hold a little bit faster than had beenþþanticipated.þþUnit labor costs, the price of labor per single unit of output, fell at a 1.4 percent rate in the second quarter, rather than increasing at a 0.5 percent rate as previously reported.þþUnit labor costs rose 1.7 percent compared to the second quarter of 2014. They increased at a 2.6 percent rate in the first quarter.þþA third report from the Commerce Department showed new orders for U.S. factory goods rose for a second straight month in July on strong demand for automobiles, which could help to keep manufacturing supported as it deals with the buoyant dollar and softening global demand.þ
Source: NY Times
