Better US job data hints at Fed rate hike
Non-farm payrolls increased 215,000 last month as a pick-up in construction and manufacturing employment offset further declines in the mining sector, the US Labour Department said yesterday.
The American unemployment rate held at a seven-year low of 5.3%.
Payrolls data for May and June were revised to show 14,000 more jobs created than previously reported. In addition, the average work week increased to 34.6 hours, the highest since February, from 34.5 hours in June.
Though hiring has slowed from last year’s robust pace, it remains at double the rate needed to keep up with population growth.
The Fed last month upgraded its assessment of the labour market, describing it as continuing to “improve, with solid job gains and declining unemployment”.
Average hourly earnings increased 5c cents, or 0.2%, last month after being flat in June. That put them 2.1% above their year-ago level, but left them well shy of the 3.5% growth rate economists associate with full employment.
Still, the gain supports views that a sharp slowdown in compensation growth in the second quarter and consumer spending in June were temporary.
Economists polled by Reuters had forecast non-farm payrolls increasing 223,000 last month and the unemployment rate holding steady at 5.3%.
Wage growth has been disappointingly slow. However, tightening labour market conditions and decisions by several state and local governments to raise their minimum wage have fuelled expectations of a pick-up.
In addition, a number of retailers, including Walmart, the nation’s largest private employer, Target and TJX have increased pay for hourly workers.
The jobless rate is near the 5% to 5.2% range most Fed officials think is consistent with a steady but low level of inflation.
A broad measure of joblessness, that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell to 10.4%, the lowest since June 2008, from 10.5% in June.
The fairly healthy employment report added to robust July motor sales and service industries data in suggesting the economy continues to gather momentum after expanding at a 2.3%, year-on-year, in the second quarter.
Employment gains in July were concentrated in service industries. At the same time, construction payrolls rose 6,000 thanks to a strengthening housing market, after being unchanged in June.
