The economy continues to grow at a solid clip, and job creation remained both a key support for that growth and a byproduct of it in July.
The jobless rate declined to 3.9% in July, as employers continued to add to their payrolls. Broader measures of unemployment also continue to decline, suggesting that not only are the ranks of the unemployed dwindling, but more workers are finding full-time work in their preferred field.
On the surface, job creation for the month may appear disappointing, as the 157,000 gain was softer than expected. However, upward revisions to the preceding two months added another 59,000 jobs, and the combined result of 216,000 moderately exceeded expectations, while falling in line with average monthly job creation of about 215,000 year to date.
Job creation in goods-producing industries was strong once again. The manufacturing sector led the way, with construction also posting solidly positive gains. Concerns about the growing trade rift between the U.S. and China and the broad impact of tariffs may be building, but that risk does not yet appear to be weighing on hiring in the manufacturing sector, despite the potential for the sector to bear the brunt of the disruption.
Average hourly earnings grew by 0.3% in July, lifting the year-over-year increase to 2.7%. Given tighter conditions and the sustained pickup in measures of consumer inflation, it seems likely that wage pressures will continue to build, but that has been long expected and is still elusive.
With the labor market seemingly on solid footing and no cool off in sight, the American worker appears to be in relatively good shape. Strength in the U.S. labor market should further support the economic expansion in the near term and the relatively upbeat attitudes of the American consumer.
The bottom line is that the July jobs report may not excite anyone, but it also shouldn’t sound any alarms. It largely reinforced the status quo, and that is still positive.
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