The economy crushed expectations in July, generating 255,000 jobs. It was the second straight month of strong jobs gains and a lot better than the 180,000 expected. Adam Shell for USA TODAY.
The labor market turned in a strong showing for the second straight month in July as employers added 255,000 jobs, pointedly easing concerns stoked by a spring slump.
The unemployment rate was unchanged at 4.9%, the Labor Department said Friday, as a sharp rise In employment was offset by a similar-size increase in the ranks of those both working and looking for jobs.
Economists surveyed by Bloomberg had forecast 180,000 job gains. Investors cheered the better-than-expected showing. The Dow Jones industrial average was up about 137 points in mid-morning trading to 18,489.
Businesses added 217,000 jobs, led by professional and business services, health care and finance. Federal, state and local governments added 38,000.
Also encouraging: Job gains for May and June were revised up by a total 18,000. May’s gains were revised to 24,000 from 11,000, and June’s to 292,000 from 287,000.
Average hourly wages rose 8 cents to $25.69 and are up 2.6% the past year, maintaining the annual rise posted in June. Earnings growth has picked up this year from the roughly 2% pace that has prevailed in the recovery but has yet to surge despite the near-normal unemployment rate. The Federal Reserve is looking for stronger pay increases and inflation as it weighs another interest rate hike.
The report could be key in determining whether the Fed raises rates in September. After last week’s news that the economy expanded by just 1.2% at an annual rate in the April-June period, the third-straight quarter of feeble growth, many analysts say only payroll gains topping 200,000 in both July and August can prod a cautious Fed to consider lifting rates next month.
But economist Paul Ashworth of Capital Economics says “Fed officials will want to see more evidence of a pickup in (economic) growth” before hiking rates. The Fed has stood pat since lifting its benchmark rate in December for the first time in nine years.
Employment has been choppy this year, with paltry gains in May followed by a boom in June and July. Some economists pointed to odd weather patterns, a listless global economy and market turbulence early this year. But many others blame a low jobless rate that historically has translated into fewer available workers but stronger wage gains in the latter stages of an economic recovery.
Yet after the latest tally, monthly job growth has averaged a solid 190,000 the past three months and 186,000 for the year, down moderately from the 229,000 pace in 2015. Many economists believe the labor market provides a more accurate picture of the economy than gross domestic product, which can be hard to measure.
“Job growth is as solid as it can be given the tightness of the labor market,” says economist Joel Naroff of Naroff Economic Advisors. He expects average additions of 175,000 to 200,000 a month the rest of the year.
And Barclays Economist Jesse Hurwitz wrote in a note to clients, “With job gains back near the cycle average of 200k, we now see lower recession risk for the US over the next 12 months.”
In July, professional and business services added 70,000 jobs; health care added 49,000; leisure and hospitality, 45,000; and finance, 18,000. Construction firms added 14,000 positions after two months of declines. And manufacturers, still buffeted by a weak global economy and the oil industry downturn, added 9,000 jobs in a sign the sector may be stabilizing.
But energy companies continued to lay off workers, chopping 7,000 jobs.
Among other positives in the report, the average work week picked up to 34.5 hours from 34.4 hours and 17,000 temporary workers were added. Employers who increase the hours of existing workers and bring on more temps may be poised to step up permanent hiring in the months ahead.
Other recent labor market indicators support the view that job growth is slowing somewhat. Payroll processor ADP said businesses added 179,000 jobs in July. And measures of both manufacturing and service sector hiring dipped last month.
At the same time, initial jobless claims, a reliable gauge of layoffs, remained at prerecession levels, and more consumers surveyed said jobs were plentiful.