The Labour Department on August 3, 2018 released its hiring and unemployment figures for July, providing a fresh snapshot of the American economy
- 157000 jobs were added last month. Economists had expected a gain of about 190000.
- The unemployment rate fell to 3.9 percent, from 4 percent.
- Average hourly earnings rose by 7 cents to USD 27.05. The year-over-year gain is unchanged at 2.7 percent.
The latest job figures follow a steady stream of hiring gains and a robust reading on economic growth. Last week, the Commerce Department reported that gross domestic product expanded at an annual rate of 4.1 percent in the second quarter, the fastest pace in nearly four years.
Like weather forecasters predicting sunny skies in Southern California, economists have watched the labour market produce consistent monthly increases in hiring recently. “I’ve never seen such a steady stream of gains — there’s no volatility in the numbers,” said Ellen Zentner, Chief United States Economist at Morgan Stanley.
Although the overall gain for July came in slightly below expectations, figures for payroll increases in May and June were revised substantially higher. The Labour Department said the economy added 268000 jobs in May, up from an initial estimate of 244000, while the June gain was revised upward to 248000 from 213000.
Martha Gimbel, Director of Economic Research at Indeed.com, noted before the report became public, that in the first half of 2018, the average monthly increase in jobs had even exceeded those in the comparable periods of 2015 and 2016. (With revisions, it was 224,000, compared with 184,000 in the same period last year and 181,000 in 2016.) “It is amazing that at this point in a recovery you are seeing growth that is on average faster than the previous two years,” she said.
Made in U.S.A.
The manufacturing sector has been strong recently and gained another 37,000 jobs in July. “We’re not seeing any impact from trade tensions, as it’s too early,” said Scott Anderson, chief economist at Bank of the West in San Francisco. Makers of machinery, fabricated metals and electrical equipment have been among the most aggressive in hiring.
Steel Ceilings in Johnstown, Ohio, hired two hourly workers last month and will hire another two this month if it can find appropriate candidates, said Rick Sandor, the company’s president. That’s not easy these days — shifts run from 5 a.m. to 2 p.m., and temporary workers start at $14 per hour. So as the labour market has tightened, Mr. Sandor has eased up on the requirements for new hires.
In the past, he insisted on a couple of years’ experience in metal fabrication, but now settles for candidates who show mechanical skills, like carpentry or heating and cooling repair. Mr. Sandor is willing to waive the requirement for a high school diploma as well and has even hired applicants with what he terms “minor” prison sentences.
“If a person was truly trying to get their life back together, we thought it would be helpful to offer them a job,” Mr. Sandor said.
Where is my raise?
Despite the steady hiring gains and the low unemployment rate, wages have been growing just barely faster than inflation.
“People keep wondering when that magical kink will occur and wages will turn on a dime,” Ms. Zentner said. Not yet, she predicted. Although the low unemployment rate has produced pockets of labor shortages, she said, “it’s not economywide.”
One reason is that plenty of workers still seem to be coming off the bench. For July, the participation rate was 62.9 percent, unchanged from June.
The Fed’s outlook
The Federal Reserve upgraded its view of the economy this week, substituting “strong” for “solid” in the statement that policymakers released after their latest meeting. The consensus on Wall Street calls for the central bank to raise rates twice more this year, in September and December.
The report confirms that trajectory, which would bring the benchmark rate to 2.25 to 2.5 percent by the end of the year. Although even that level is low by historical standards, the Fed’s slow but steady campaign to normalize interest rates after years near the zero bound is beginning to be felt.
Home buyers are encountering higher mortgage rates, one reason that the housing market has been faltering lately even as other economic indicators have remained strong, along with the stock market.