The economy added 215,000 jobs last month, a welcome sign that the recovery is chugging along without losing steam.
The unemployment rate remained at 5.3 percent, according to the latest Labor Department report, and wages continued their slow creep upward.
The jobs data came in exactly at the consensus forecast from mainstream economists, but it was a report that was anything but boring. Second-quarter growth was a disappointing 2.3 percent and the jobs number eased concerns of a slowdown.
Here are three important takeaways from Friday’s numbers.
Positives within the details:
When not rounded to 5.3 percent, the unemployment rate actually fell below its average before the Great Recession. That’s a first time in this economic recovery.
“While this milestone is a testament to the strength of the labor market recovery so far, several alternative measures of labor market strength have not fully recovered, and some level of slack remains,” Jason Furman, head of the White House Council of Economic Advisers, said in his blog.
The 215,000 jobs created in July were in line with prior months and over the past three months, job growth has averaged 235,000. That’s under last year’s monthly average of 246,000 jobs.
“At this pace of job growth, the slack in the job market is quickly being absorbed,” said Mark Zandi, chief economist for forecaster Moody’s Analytics. “The economy is likely to be back to full employment in the middle of the presidential electioneering next summer.”
Retailers added almost 36,000 jobs in July on top of similar numbers in recent months.
“Once again, the employment report points to solid growth and retail continues to makes its contribution to pushing the trend upward,” said Jack Kleinhenz, chief economist of the National Retail Federation. “Retail job gains were broad-based and consistent with our expectation of consumer spending and future retail sales.”
Retailers and restaurants are expected to enjoy the windfall from falling energy prices, which many economists think will put an extra $700 in the wallets of American households this year. To that end, the leisure and hospitality sector added a solid 30,000 jobs last month.
The manufacturing sector added 15,000 jobs in July, after a weak showing for much of the year. Manufacturers face headwinds from a strong U.S. dollar, which makes their products more expensive abroad and those of their competitors cheaper when imported here.
“This was an encouraging figure, one that is closer to the monthly average of last year when activity in the sector was growing more robustly,” said Chad Moutray, chief economist for the National Association of Manufacturers. “Yet, it is important to note that...we are not out of the woods yet from recent weaknesses.”
Average hourly earnings rose by 0.2 percent in July. That’s not a sizzling pace, but it beats last month’s flat number.
Over the past 12 months, earnings have risen by more than 2.1 percent. It’s slightly better than the rate of inflation and economists hope that as the job market tightens workers can demand higher pay, filtering back through the economy as greater spending.
Economists at PNC Financial Services in Pittsburgh note that average workweek rose slightly last month and total hours worked ticked up 0.5 percent. When you add together more workers, higher average wages and a longer workweek, it means workers’ earned income rose by 0.6 percent in July.
Inflation rose last month by 0.2 percent last month, subtracting from purchasing power “so real income was likely up by 0.4 percent in July,” said Gus Faucher, a senior economist at PNC.
Translation: Workers have more money in their pocket and more spending power.
Fed can move in September:
The Federal Reserve is watching job growth and the status of wages as it ponders when to hike its benchmark interest rate for the first time in almost a decade. Once rates begin rising, lending rates for mortgages, car and student loans and credit card debt will slowly rise.
The Fed wants to be sure that the economy can handle higher borrowing costs and Friday’s report did nothing to change the view that the first rate hike may come in September, followed by a second one in December.
Friday’s report means “it will be hard to justify delaying an initial Fed rate hike,” said Scott Anderson, chief economist of Bank of the West in San Francisco. “I continue to forecast a September Fed rate hike.”
JULY BY THE NUMBERS
Professional and business services – up 40,000
Manufacturing – up 15,000
Leisure and hospitality – up 30,000
Health care – up 27,900
Construction – up 6,000
Temporary help services – down 8,900
Transportation and warehousing – up 14,400
Retail – up 35,900
Financial services – up 17,000
Government jobs – up 5,000