The Economy

Job Market Posts Second Straight Strong Gain

Following the solid job growth in June, the July report suggests the labor market remains a bright spot for the U.S. economy.
Matthew HellerAugust 8, 2016

Hiring in the U.S. surged for a second straight month in July, indicating May’s downturn was a fluke and the labor market remains robust.

Total non-farm payroll employment increased by a seasonally adjusted 255,000 last month, the Labor Department reported, after an upwardly revised gain of 292,000 in June. The unemployment rate held steady at 4.9%, near an eight-year low, and wages matched their strongest annual pace of growth in seven years.

The best two-month stretch of hiring so far this year dampened any fears resulting from the anemic job growth in May, when employers added only 11,000 jobs.

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“The strong employment momentum of the past two months suggests that the May slump was a fluke,” Nariman Behravesh, chief economist at IHS Markit, told the Los Angeles Times.

The July jobs report also contrasted with recent data showing a slowdown in overall economic growth since the end of 2015. Gross domestic product rose a meager 1% at a seasonally adjusted annual rate during the first half of the year.

Even with May’s slowdown, job growth has averaged 190,000 over the last three months. “That compares favorably to the 206,000 average for the 12 months ended July 31 and signaled the labor market is growing solidly,” the Times said.

The Labor Department also reported that average hourly earnings jumped 8 cents to $25.69 in July, well above the two-cent rise the previous month. For the year ended July 31, wages have increased 2.6%, well above inflation.

“The question at this point remains, which data point is more telling of the underlying momentum in the economy: an average 1% GDP or an average of 200,000 payrolls,” Lindsey Piegza, chief economist at Stifel Fixed Income, told The Wall Street Journal.

After the poor report on second-quarter economic growth, most analysts predicted the Federal Reserve would hold its benchmark short-term interest rate steady at least though the fall. With the July job data, the probability of a small hike in September increased to 18% from 12%, according to the CME Group futures exchange.