Instant Analysis: Jobs report for July

Scott Anderson
Posted by Scott Anderson
Chief Economist

A better-than-expected employment report for July caps a two-month period of robust U.S. job gains.

Carpenter varnishing a large board

Average hourly earnings growth accelerated last month (0.3%) and hours worked increased to 34.5 from 34.4, indicating some improvement in income growth last month as well. This is good news for continued healthy consumer spending growth ahead.

Non-farm payrolls increased by 255K in July compared to consensus expectations for a 180K gain. June payrolls were revised higher to a 292K gain from an originally reported 287K. There were total net positive revisions of past payrolls of 18K.

There were broad-based job gains across all major industries, including construction and manufacturing. The lone exceptions being computer and electronics manufacturing and education, which both lost jobs last month.

The unemployment rate in July held steady at 4.9%, while the labor force participation rate improved to 62.8% from 62.7% in June.

These job numbers are good enough to keep the Fed on track for a December rate increase despite sluggish GDP growth in the first half of this year. The market is likely underestimating the chance of another hike this year. Fear of a sharp U.S. growth retrenchment ahead is likely overdone.

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