The U.S. labor market hit its stride in July, as employers added workers at a solid clip, the jobless rate matched a 16-year low and monthly wage growth picked up.
Payrolls rose 209,000 in July, well above the estimate of 180,000, while May-June revisions added 2,000 more jobs. The unemployment rate, meanwhile, derived from a separate survey of households, fell to 4.3%, matching the estimate. Average hourly earnings rose 0.3%, also matching the estimate, and are up 2.5% year-over-year.
The most significant figure for industry, though is 16,000. That’s the number of factory jobs added during the month, another tick up — the seventh time in the last eight months the number of manufacturing jobs has increased.
According to the National Association of Manufacturers, the sector has averaged 12,500 jobs added since November. In step, wages have increased 2.8% year-over-year to $1,092.03 per week.
Job gains were broad-based during July, led by the largest jump in leisure and hospitality employment since September 2015, a move driven by restaurants. Hiring also hit five-month highs in manufacturing and education and health services.
Stronger household incomes and buoyant consumer confidence are helping to propel demand, while a rebound in global growth has provided more opportunities for American exporters. With job vacancies close to record highs, employers are reluctant to fire workers, keeping jobless-benefit claims near the lowest in four decades.
The acceleration in wages on a monthly basis may show that managers are finally starting to boost pay some more in a bid to keep or attract workers. Even so, the 2.5% pace of annual wage growth is little changed over the past two years, owing to factors including weak productivity, as well as people returning to the labor force and accepting lower-skilled work.
The solid job-market gains should at least keep household spending humming in the third quarter as the economy struggles to break out of a 2% growth pattern of the last several years. The July figures may also give a cleaner read on labor-market health after unseasonal weather and fluctuations in end-of-school year hiring muddied the picture over the past few months.
And while tepid broader inflation has been a challenge for Federal Reserve policy makers, the broader thrust of the employment report is likely to keep the central bank on course. Officials have signaled they’re ready to move forward with reducing the Fed’s $4.5 trillion balance sheet and potentially increasing interest rates once more this year.
While President Donald Trump has been praising the pace of job gains since he took office in January, the average figure of 179,000 over the past six months remains below the typical 187,000 per month in 2016. His goal of adding 25 million jobs over 10 years would require additions of 208,000 a month.
“The labor market remains very solid and prospects remain very positive,” Ward McCarthy, chief financial economist at Jefferies LLC in New York, wrote in a research note ahead of the release. “The private sector continues to have a very high level of job openings and is approaching full employment across the skill set spectrum.”
In Other Notes
The participation rate, or share of working-age people in the labor force, increased to 62.9% from 62.8%. … The U-6, or underemployment rate, was unchanged at 8.6%. That figure includes part-time workers who’d prefer a full-time position and people who want a job but aren’t actively looking. … The measure of those working part-time for economic reasons fell by 44,000 to 5.28 million. … Private employment increased by 205,000, above the estimate of 180,000, after a 194,000 advance in June. … Government payrolls rose by 4,000, retailers added 900, leisure and hospitality was up 62,000. … The average workweek for all workers remained unchanged at 34.5 hours, matching the estimate. … Finally, wages were up across all industry groups, and overall wages are rising at 2.3% three-month annualized pace.
By Michelle Jamrisko