WASHINGTON • Employment in the United States rose more than expected in July and wages picked up, which should bolster expectations of an acceleration in economic growth and raise the probability of an interest rate hike by the Federal Reserve this year.
Non-farm payrolls increased by 255,000 jobs last month as hiring rose broadly after an upwardly revised 292,000 surge in June, the Labour Department said yesterday.
"Solid labour markets mean households will be in good shape, incomes will be OK," Barclays' chief US economist Michael Gapen said before the report. He also said the Fed probably will raise rates in September if hiring remains strong.
The unemployment rate was unchanged at 4.9 per cent as more people entered the labour market. Highlighting labour market strength, average hourly wages rose a healthy eight US cents. May payrolls were revised up to 24,000 from the previously reported 11,000.
Economists polled by Reuters had forecast payrolls increasing 180,000 in July and the unemployment rate dipping one-tenth of a percentage point to 4.8 per cent.
The labour force participation rate, which indicates the share of working-age people who are employed or looking for work, rose to 62.8 per cent from 62.7 per cent.
Last month's strong job growth should reinforce the US central bank's confidence in a labour market that officials view as at or near full employment.
Fed chairman Janet Yellen earlier said the economy needs to create just under 100,000 jobs a month to keep up with population growth.
The second straight month of robust job gains is a boost to an economy after growth averaged a 1 per cent annual rate in the last three quarters. After a policy meeting last month, the Fed described the labour market as having "strengthened" and said that it appeared to be still tightening.
The central bank had raised interest rates at the end of last year for the first time in nearly a decade, but has held them steady since amid concerns over persistently low inflation. Most economists expect another rate hike in December, though financial markets have almost priced out that possibility.
Wage growth offered more promising signs of acceleration, with average hourly earnings rising 0.3 per cent from a month earlier, the most since April, to US$25.69 (S$34.46). The year-over-year rise was 2.6 per cent in July, the same as in June.
Manufacturing sector employment increased by 9,000 jobs last month after adding 15,000 positions in June. Construction payrolls rose 14,000 following three consecutive months of declines. Mining shed a further 7,000 jobs last month.