US jobs growth remains moderate in July; wage gains still strong
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The US economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.
PHOTO: AFP
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WASHINGTON - The United States economy maintained a moderate pace of jobs growth in July, but solid wage gains and a decline in the unemployment rate pointed to continued tightness in labour market conditions.
Non-farm payrolls increased by 187,000 jobs in July, the Labour Department said in its closely watched employment report on Friday. Data for June was revised lower to show 185,000 jobs added instead of the previously reported 209,000.
Economists polled by Reuters had forecast a gain of 200,000 jobs.
The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.
Companies are hoarding workers after struggling to find labour during the Covid-19 pandemic. Employment in some areas like leisure and hospitality remains below pre-pandemic levels.
Despite the moderation in jobs growth, the labour market remains tight. The unemployment rate fell to 3.5 per cent from 3.6 per cent in June, dropping back to levels last seen more than 50 years ago.
That is well below the Federal Reserve’s latest median estimate of 4.1 per cent by the fourth quarter of 2023.
The government reported this week that there were 1.6 job openings for every unemployed person in June, little changed from May.
Wages continued to rise at a solid clip. Average hourly earnings gained 0.4 per cent after climbing by the same margin in June.
That kept the year-on-year increase in wages at 4.4 per cent.
The annual wage growth remains too high to be consistent with the Fed’s 2 per cent inflation target. Data in July showed the increase in annual inflation slowed sharply in June.
Economists who have long been forecasting a downturn by the fourth quarter of the year are increasingly becoming convinced that the soft-landing scenario for the economy envisaged by the Fed is now possible.
The raft of inflation-friendly data has led many economists to believe that the Fed’s fastest rate-hiking cycle in more than 40 years is probably over.
The US central bank has raised its policy rate by 525 basis points since March 2022. REUTERS
