Official figures showed the USA economy created 255,000 net new jobs in July, though the unemployment rate remained static at 4.9% – reflecting a jump in the numbers starting to look for work.
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The so-called household survey, a separate measure that determines the official unemployment rate, showed the unemployment rate held at 4.9 percent and that more than 400,000 jobs were added last month – even stronger than the payrolls survey.
The average earnings for hourly pay increased during July by 8 cents and are up more than 2.6% compared to the same month past year.
The dollar rallied against a basket of currencies after the data was released, while prices for USA government debt fell as traders ramped up bets for an eventual rate hike. While that would be a step down from June’s 287,000 surge, it would still be above the average monthly advance of 171,500 jobs over the first half of the year.
Wall Street opened higher after the data, with the Dow Jones Industrial Average up 0.5 per cent at the opening bell.
Although the Labor Department will release three more months’ worth of monthly hiring data before voters go to the polls on Nov 8, the buoyant picture presented for July comes at a moment in the campaign when polls are in flux.
The reports also raised the probability that the Federal Reserve would increase interest rates again before the end of the year. As seen in the chart below, U.S.jobs growth has slowed a bit from a very strong trend, and inflation expectations and realized inflation remain fairly moderate, likely keeping the Fed on a very deliberate path.
The Fed has to reconcile strong hiring trends with subdued economic growth, with United States gross domestic product increasing at an annualised pace of just 1.2 per cent in the second quarter. The July payrolls strength underscores the economy’s sound fundamentals and economists said GDP growth is expected to be revised upwards to 2.5 per cent in the second quarter.
In addition, 18,000 more jobs were created in May and June.
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“If you have got steady growth and a tightening labour market, I think that is a recipe where the Fed will become increasingly uncomfortable with the very low level of rates”.
