U.S. Unemployment at New Record Low

The unemployment rate in the U.S. has dropped to a new minimum of 4.0 percent in more than 17 years, even though, the wage gains are going to slow down after three months of increases.

The employment report from the Labor Department on Friday is supposed to underscore the economy’s strength and confirm the expectations that the Federal Reserve will raise its interest rate forecasts for 2018.

According to Reuters, the U.S. financial markets have almost priced in an interest rate increase at the Fed’s March 20-21 policy meeting, meaning that the Fed is currently anticipating three rate hikes this year.

“A stronger jobs report with another healthy crop of wage gains increases chances that the Fed may add a fourth rate hike before year’s end,” said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings in New York.

A Reuters survey of economists showed that after a similar rise in January, Nonfarm payrolls probably increased by 200,000 jobs last month. That is above the monthly average of 181,000 jobs in 2017 and almost double the 100,000 jobs per month needed to keep up with growth in the working-age population.

Meanwhile, average hourly earnings raised 0.2 percent in February, where after a surprise drop in October, they continued rising 0.3 percent in November, 0.4 percent in December and 0.3 percent in January. Last month’s expected moderation is seen lowering the year-on-year increase in average hourly earnings to 2.8 percent from 2.9 percent in January, the largest rise since June 2009.

Reuters reports that the wage growth in February could rise drastically because of the announced wage raises in companies like Starbucks Corp and FedEx Corp which use some of their savings from the $1.5 trillion income tax cut package to boost workers’ salaries. Walmart also announced an increase in entry-level wages for hourly employees at its U.S. stores effective February.

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