Another Solid Month of Hiring Expected

WASHINGTON (AP) -- U.S. businesses likely closed out 2017 with a strong month of hiring fueled by growing optimism among companies about the economy's momentum.

Economists have forecast that employers added 189,000 jobs in December, according to a survey by data provider FactSet. The unemployment rate is projected to remain 4.1 percent, the lowest level since 2000.

The government will release the December jobs report at 8:30 a.m. Eastern time Friday.

Solid economic growth in both the United States and major countries overseas is supporting more hiring. Factory managers say they received the most new orders in December than in any month since 2004. Retailers have reported strong holiday sales. And builders are ramping up home construction to meet growing demand.

Sales of existing homes reached their fastest pace in nearly 11 years in November. Consumer confidence is at nearly a 17-year high. And the Dow Jones industrial average reached 25,000 for the first time on Thursday.

Most economists expect the Trump administration's tax cuts to help speed the economy's already decent pace of growth. Some envision the unemployment rate dropping as low as 3.5 percent by the end of 2018. A rate that low would mark the lowest such level in nearly a half-century, and it would likely force businesses to accelerate pay raises to attract and retain employees. Pay raises have remained puzzlingly sluggish for many U.S. workers despite the robust job market.

Some businesses, however, are already howling that they can't find enough qualified people. There are roughly 6 million available jobs, near a record high, according to government data. Should unemployment fall to 3.5 percent, those complaints will intensify.

For at least two years, economists have been expecting the falling unemployment rate to boost wages. Though average hourly pay growth has picked up a bit, it remains about 1 percentage point below the 3.5 percent annual gain that typically occurs in a healthy economy.

Carl Tannenbaum, chief economist at Northern Trust, says many business surveys include anecdotes about executives raising pay to attract more potential employees. But those anecdotes "show up everywhere except for the numbers," Tannenbaum said.

Economists point to several trends that may be keeping a lid on wage gains.

As the vast baby boom generation ages — 10,000 of them are turning 65 every day — they are retiring and are being replaced by younger workers, who typically earn far less money. That is likely suppressing overall wage growth, economists say.

Worker pay also depends on productivity, or how efficient employees are. And productivity has been weak for roughly a decade.

In 2000, the last time the unemployment rate fell this low, wages were growing at a 4 percent annual pace. But productivity, which measures workers' output per hour, was much higher then. A falling unemployment rate can force up pay, but rising productivity has a much greater effect.

Many businesses, meanwhile, feel they have limited ability to pass on higher wages to consumers in the form of higher prices. Online shopping and cheaper imported goods make it easier for consumers to find bargains. That leaves retailers and other firms reluctant to raise pay.

(KA)