US job growth keeps Fed rate hike on tap
WASHINGTON: The US economy churned out solid job growth in July that looks likely to leave the Federal Reserve on track for an interest rate increase this year.
The economy added 215,000 jobs last month, the Labour Department said on Friday, marking 65 straight months of gains – the longest streak on record – for a total of 13 million jobs.
“In the last six years the American people have worked really hard to bounce back from the worst economic crisis since the Great Depression,” President Barack Obama said.
In another positive sign, job growth in May and June was stronger than first thought, by a combined 14,000 payrolls. The department revised the number in June to 231,000 and in May to 260,000.
That brought the average monthly jobs gains to 235,000 over the past three months, heightening expectations that the Fed could raise its near-zero federal funds rate as early as next month.
The unemployment rate held steady at a seven-year low of 5.3 per cent, as expected. That is close to the 5.0 to 5.2 per cent range the Fed views as normal for maximum employment over the longer run.
The Fed has held the benchmark federal funds rate near zero since late 2008 in a bid to support the economy’s recovery from the Great Recession, and has said it would move rates higher carefully so as not to derail growth.
In its late- July policy statement, the Federal Open Market Committee said it would consider it appropriate to raise the fed funds rate when it had seen “some further improvement” in the labour market and was “reasonably confident” that inflation, now tepid, will move back towards its 2.0 per cent target.
“There can be no doubt in our view that today’s employment report does indeed represent ‘some further’ improvement in the labour market – if not more,” said Harm Bandholz of UniCredit.
“It, therefore, further strengthens our view for the first rate hike in September.”
The US private sector added 210,000 jobs, while government payrolls increased by 5,000.
Job growth was largely concentrated in retail trade, health care, professional and technical services, and financial activities. The robust US auto market encouraged dealerships to add 13,000 jobs, about a third of the total retail sector gains.
Construction added 6,000 jobs after none in June, while manufacturing bounced higher, by 15,000 jobs, after months of tepid gains.
Falling oil and other commodity prices continued to take a toll on employment in mining, which lost 5,000 jobs in July. Since the recent peak last December the sector has shed 78,000 jobs.
The length of the average workweek ticked higher, while the hourly wage – watched closely by the Fed for signs of tightening slack in the jobs market – edged up 0.2 per cent to 24.99 after being flat in June. Year- on-year, wages were up 2.1 per cent.
“Yearly earnings growth has been unable to break above 2.3 per cent in the post-recession economy, a sign labour market slack may be greater than indicated by the unemployment rate,” said Jay Morelock of FTN Financial. The number of long-term unemployed – those out of a job for at least 27 weeks – barely budged at 2.2 million, and represented nearly 27 per cent of the jobless. The labour force participation rate was unchanged at 62.6 per cent, the lowest level since 1977. — AFP