United States: Payroll growth solid in July, unemployment rate inches back down
August 4, 2017
The U.S. labor market posted another month of solid performance in July as payroll growth was stronger than expected and the unemployment rate fell back to its 16-year-low of 4.3%. Non-farm payrolls rose by 209,000 in July, surpassing market expectations of 183,000 new jobs. The July print was slightly below June’s revised reading of 231,000 new jobs (previously reported: +222,000) but a formidable output nonetheless.
The job growth spurred in July came mostly from food and beverage services (+53,000), professional and business services (+49,000), and health care (+39,000). Public sector hiring eased notably from 37,000 new jobs in June to 4,000 in July. The details in the July report showed little change from June in most of the other aspects of the labor market.
In the household survey, job growth outpaced a solid gain in the labor force. This moved the unemployment rate one tenth lower to 4.3% while the labor force participation rate inched up to 62.9%, both solid positives to the economy.
Hourly earnings for all nonfarm payroll employees also increased this month by nine cents, a 0.3% month-on-month change. Nonetheless, average annual hourly earnings remained steady at 2.5% and is stagnant despite the tightening of the labor market. The results of July’s report—particularly the pick-up in month-on-month wage growth—could encourage the Federal Reserve to push through with their monetary policy agenda and hike rates for a third time before the end of the year. However, such a move will remain dependent on future developments on the price front, as inflation remains surprisingly low despite the consistent growth of the labor market.
Author: Lindsey Ice, Economist