American firms added 215,000 jobs in July, a bit less than forecast and the unemployment rate held at a seven-year low of 5.3 percent, according to the Labor Department in Washington today. The two month revision added 14,000 jobs to the May and June totals.
Last week's FOMC statement said the bank needs to see “some further improvement in the labor market” to help justify a rate increase.
The Fed governors also want to be “reasonably confident” inflation will move back to its 2 percent goal in the medium term, though several have stated that a lack of current inflation would not prevent a rate hike.
The Fed's preferred inflation gauge, the annual core PCE price index was 1.3 percent in June and has averaged 1.4 percent over the past year.
Job growth has been steady and strong more than two and a half years averaging 225,000 new positions a month since the beginning of 2013, the best stretch of job creation in twenty years.
Private payrolls increased by 210,000 in July and manufacturing companies added 15,000 new workers, the most in six months.
Retail and professional services led the industry sectors adding 63,000 positions. Health care workers jumped by 28,000, including 16,000 hospital employees. Mining employment, which covers oil field workers, fell by 5,000 as the shakeout from the collapse in crude prices continued. Employment in construction, wholesale trade, information, and government, showed little change over the month.
The household employment survey, from which the unemployment rate is calculated, showed a gain of 101,000 jobs, after June's 56,000 loss. The payroll numbers are collated from a poll of businesses known as the establishment survey.
Despite the robust payrolls and an unemployment rate close to what in the past would have been considered full employment, wages, hours worked and labor force participation numbers depict an economy with little need for employers to increase worker compensation.
Average hourly earnings rose 0.2 percent in July to $24.99 as expected. The annual gain of 2.1 percent was just ahead of June’s 2.0 percent run and on a par with the post-recession average of 2.0 percent. Economists had forecast a 2.3 percent gain.
Weekly hours worked climbed 0.1 to 34.6, the first rise in 10 months but little altered from the 34.5 average of the past three and a half years.
Labor force participation, which charts the share of working-age people who are in jobs or looking for work, stayed at its modern era low of 62.6 percent in July as in June. It is down from 62.9 percent in May.
The percentage of people participating in the labor market peaked at 67.3 in January 2000 and averaged 66.3 from then until October 2008 when it began a precipitous decline that has yet to reach bottom.
Economists are divided on the cause of this rapid drop in economic participation.
Some analysts cite the advancing retirement rate of the first group of baby boomers, born from 1945-1950, who are at least 65 this year. Others note that long periods of unemployment as we saw in the early years of the recovery leave many workers discouraged and with obsolescent skills. All workers are subject to the rapid technological change that demands continual adaptation by workers, something that may be difficult for those already out of work.
One reason for the lack of wage growth, since the recession the annual increase in wages has been about what half it was before the financial crisis, may be in the type of jobs the economy has been producing.
Service industries, which comprise about 90 percent of the economy, have added the bulk of the new employment over the past six years and these are generally lower paying and with fewer benefits than in the manufacturing and professional fields
According to information from the Institute for Supply Management the service sector expanded at the fastest rate in a decade in July.
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