U.S. Adds 255000 jobs in July and unemployment rate steady at 4.9 %
U.S. employers hired at a steady pace in July, a sign of underlying strength for the labour market despite a host of mixed economic signals.
Nonfarm payrolls rose by a seasonally adjusted 255000 last month, the Labour Department said on August 5, 2016. Revisions showed U.S. employers added 18000 more jobs in May and June than previously estimated.
The unemployment rate, calculated from a separate survey of American households, was unchanged at 4.9 % in July.
Economists surveyed by The Wall Street Journal had expected employers would add 179000 jobs in July alongside an unemployment rate of 4.8 %.
Hiring figures have been strong for two consecutive months, though readings were choppy earlier in the year. So far in 2016 employment gains have averaged 186000 per month, down from 229000 per month in 2015.
A slowdown would not be a complete surprise–some policymakers and economists expect such moderation as the labour market tightens.
“This deceleration from last year’s 200,000-plus pace should not be unexpected as the economy has moved closer to full employment,” Federal Reserve Bank of Dallas president Robert Kaplan said in a speech earlier this week.
Economists surveyed by the Journal earlier this year on average estimated the U.S. only needed to add 145000 jobs each month to keep up with growth in the workforce.
A tighter job market would also 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 USD 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.
Another month of hiring was enough to draw more people into the workforce. The labour 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 Boom generation is retiring but also because some younger workers have given up on finding a job.
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 of these added jobs.
The latest numbers on hiring–June and July are the best two-month stretch of hiring this year–are welcome after a series of mixed signals. The latest economic data has shown a broad deceleration in economic output, falling business investment, healthy consumer spending, continued trouble in the energy sector and signs manufacturers have stabilized after a rocky winter. Globally, markets were unsettled when the United Kingdom voted in June to leave the European Union but have since calmed.
The unexpectedly weak readings for gross domestic product during the first half of the year put extra attention on the jobs report to help clarify the outlook.
The economy’s performance is one factor in the U.S. presidential election.
Democratic nominee Hillary Clinton’s campaign in part is based on President Barack Obama’s record, which includes recovery from the 2007-2009 recession but also the slowest expansion since at least World War II.
Stephen Miller, a senior policy adviser for Republican Donald Trump, said the latest GDP figures are evidence of “a shockingly weak recovery.”
US GDP revisions point to a weaker growth path
According to an analysis of Safra Sarasin Bank,US GDP data from recent quarters were revised down, suggesting that the economy is on a weaker growth trajectory than previously estimated.
Investments and exports suffered the largest negative adjustment, casting new light on the lasting impact of lower energy prices and the strong dollar.
Weaker GDP also helps explaining why inflation decelerated.
The latest revisions of US GDP data created a shift in the understanding of current economic conditions. While growth was revised slightly up for 2015 overall (+0.2 %), the pace of expansion slowed significantly in recent quarters, from 1.4 % to 0.9 % in 4Q2015, and from 1.1 % to 0.9 % in 1Q2015. The most recent quarter, 2Q 2016, was also reported at a disappointing 1.2 %, after real-time tracking estimates had suggested twice as much.
Some of the negative adjustments can be tracked to softer exports than previously pub- lished, but the major factor appears to be in the much weaker investment. And here lies the most worrisome implication of the revisions. Weakness in corporate spending was already known, but ascribed to specific factors such as the decline in energy prices, which forced a broad restructuring in the sector, as well as the strength in the dollar. Both explanations still stand, but their joint impact appears now to be much broader in magnitude, scope, and persistence: the hit was not limited to specific industries (energy, export-driven manufacturing), and the investment downturn seems to have some lasting effect – hopes for a quick turnaround have failed to materialized. Going forward, the stabilization in energy prices and in the dollar should at least halt the bleeding, although the risk of a second drop, driven by the need to adjust inventories to a level of activity lower than previously expected, must be closely watched.