Unemployment is below 5%
WASHINGTON—The U.S. labor market in July capped off the best two-month stretch of hiring so far this year, a sign of strength for an economy that has been showing mixed growth signals in recent months.
Nonfarm payrolls rose by a seasonally adjusted 255,000 last month, the Labor Department said Friday. Wages for private-sector workers matched their strongest annual pace of growth in seven years, more Americans entered the labor force during the month and the jobless rate held steady 4.9%.
After two months of choppy performance, the strong showing suggests employers are looking past global concerns and dismissing signs of a slowing U.S. economy. It also raises the odds of a Federal Reserve rate increase as soon as next month.
Revisions showed U.S. employers added 292,000 jobs in June and 24,000 in May, 18,000 more than previously estimated. So far in 2016, employment gains have averaged 186,000 a month, down from 229,000 a month in 2015.
“The economy is expanding, not as fast this data would suggest, but fast enough to employ more people every month and thereby add to total consumer income,” said Steve Blitz, chief economist at M Science.
Unexpectedly weak readings for gross domestic product during the first half of the year, delivered last week, put extra attention on Friday’s jobs report to help clarify the outlook for the Fed and the unfolding presidential election.
Fed officials next meet Sept. 20-21. Economists hadn’t expected the central bank to raise its benchmark interest rate then, though the probability is a touch higher after the latest labor-market reports.
“This data will surely get the attention of policy makers at the Federal Reserve who likely will begin to talk openly about a possible December rate hike,” said Joseph Brusuelas,chief economist at RSM.
In the campaign, meanwhile, Democratic nominee Hillary Clinton’s campaign in part is based on President Barack Obama’s record, which includes recovery from the 2007-09 recession but also the slowest expansion since at least World War II.
Stephen Miller, a senior policy adviser for Republican nominee Donald Trump, said the latest GDP figures are evidence of “a shockingly weak recovery.”
The labor-market resilience, however, suggests the economy could be poised for faster growth. A tighter job market would be expected to push up wages as employers compete over a diminishing pool of workers. Average hourly earnings for private-sector workers rose by 8 cents, or 0.3%, from June to July to $25.69. From a year earlier, average hourly earnings were up 2.6%, outpacing inflation. The consumer-price index increased 1.1% in June from a year earlier.
The average workweek last month rose 0.1 hour to 34.5 hours, which also should put more money in consumers’ pockets.
Another month of hiring was enough to draw more people into the workforce. The labor-force participation rate rose to 62.8% in July from 62.7% in June. The figure has been hovering near the lowest levels in almost 40 years, partly because the baby boomer generation is retiring but also because some younger workers have given up on finding a job.
Indeed, the rate for men ages 25-54—who should be in their prime working years—has troubled economists. Labor-force participation for the group topped out at 97.9% in 1954. For about five decades, it has been heading lower. The measure was 88.4% in July, matching the worst level of the year.
The figures look even worse for those with less education. Last year, the participation rate for college-educated men was 94%, while the rate for men with at most a high-school diploma was 83%, according to a White House estimate.
Another measure of unemployment and underemployment, including Americans who are working part time because they can’t find full-time jobs, rose to 9.7% in July from 9.6% in June.
Job gains in July were broad-based. Professional and business services—such as computer design and engineering services--health care, finance, food services, construction, manufacturing and government all added jobs.
The mining sector, which includes the oil and gas industry, continued to shrink. Sector payrolls have declined by 220,000 since a September 2014 peak.
The latest numbers on hiring are welcome after a series of mixed signals. The latest economic data has shown a broad deceleration in economic output, falling business investment and continued trouble in the energy sector. That’s only been partially offset by healthy consumer spending and signs manufacturers have stabilized after a rocky winter. Globally, markets were unsettled when the U.K. voted in June to leave the European Union but have since calmed.
“The July labor market report was exceptionally strong, and the warts were few and far between,” said Millan Mulraine, deputy chief U.S. macro strategist at TD Securities.
