US job growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years, pointing to further labour market tightening that could encourage the Federal Reserve to raise interest rates again in December.
The country's jobless rate hit a near half-century low in September.
USA employers added more people than expected to their payrolls in October as wages grew at their fastest pace since April 2009, according to the jobs report released Friday by the Bureau of Labor Statistics. An estimated 711,000 people joined the labor force last month.
The influx of new job-seekers lifted the proportion of Americans with jobs to the highest level since January 2009.
But overall, economists say wage growth, particularly over the past three months, is a positive sign that employers are starting to pay more to attract workers in a tightening labor market.
The resulting strength in customer demand has led companies to steadily add workers.
The jobs news will nearly certainly overwhelm another piece of economic news released Friday - the trade deficit in goods and services, which widened in September as imports rose more than exports.
"Tax relief is helping our economy grow and Iowans are keeping more of their hard-earned money", Rep. David Young, R-Iowa, who is in one of the most competitive House races in the country against Democrat Cindy Axne, tweeted Friday after the jobs numbers came out.
The jobs report should bolster the Trump administration's talking point on the economy ahead of next week's midterm elections and cement expectations that the Federal Reserve will raise interest rates at its meeting in December. All levels of government added 4,000 jobs from public payrolls last month. The Fed is expected to raise rates for a fourth time this year in December, and economists expect at least two further increase next year. Average monthly hiring this year is above the pace of 2017. Professional and business services 35,000.
Hiring spanned all sectors. Construction expanded by 30,000 roles, almost half of which focus on residential homes. Retail payrolls rose by only 2,400, likely restrained by layoffs related to Steinhoff's Mattress Firm bankruptcy as well as some store closures by Sears Holdings Corp (SHLDQ.PK). "I know what kind of work it takes to earn more money, and it's really paying off". October marked the first time since the recession ended more than nine years ago that the closely watched pay gauge rose better than 3% from a year earlier. That growth followed a 4.2 percent annual pace in the April-June quarter.
"The economy peaked in the second quarter of this year and has been slowing for four to five months", said David Kotok, chair of Cumberland Advisors. Higher tariffs on Chinese imports have raised costs for many manufacturers.
The labor force participation rate also ticked up in October to 62.9%, a 0.2% increase from September. There are also signs that pay hikes are taking hold more firmly: Amazon.com Inc. just raised its minimum hourly wage to $15 for USA employees. The Standard & Poor's 500 index dropped 6.9 percent in October, the biggest decline in seven years.
There is some concern that higher wages might fuel inflation if companies turn around and increase prices for consumers.
So far, though, inflation remains in check. Both hourly and weekly earnings are rising faster than inflation, which rose by 2.0 percent using the Personal Consumption Expenses (PCE)-the Federal Reserve's preferred measure, because it is so broad-in the most recent data from September.