With 209,000 jobs added to payrolls in July, the economy has chalked up a jobs-creation streak. Growth in payrolls has topped 200,000 for six straight months, something the government says we haven't seen since 1997.
Where do you find the new jobs? Mainly in these sectors, according to the Labor Department's report:
- Business and professional services, which added 47,000.
- Manufacturing, 28,000.
- Retail trade, 27,000.
- Construction, 22,000
Jobless rate is higher
Yes, the report also shows that the unemployment rate rose slightly, to 6.2 percent from 6.1 percent last month. Joblessness ticked up as more people looked for work.
"The increase in the unemployment rate came from weak household employment growth on the month (131,000 jobs) and an increase in the labor force participation rate," notes Scott Anderson, chief economist for Bank of the West. Keep in mind that the household survey provides the backdrop for the unemployment rate, while businesses are surveyed for the job-growth portion.
Wage gains? Not so much
While Americans wait for wages to percolate from sustained job growth, they have found no such payoff this month. The Labor Department says average hourly earnings have risen 2 percent over the past year.
The Federal Reserve's statement following this week's meeting referenced improvement in the labor market but noted "significant underutilization of labor resources." In other words, plenty of people are still struggling. Among the latest signs: the number of Americans who are working part-time but would like full-time work was unchanged at 7.5 million in July. In addition, the number of those jobless for 27 weeks or more (the so-called long-term unemployed) stood at 3.2 million last month.
What will the Fed conclude?
The biggest question in the financial markets now is whether the Federal Reserve will feel compelled to hike short-term rates sooner rather than later. During an interview on CNBC before the jobs report, Richard Fisher, president of the Federal Reserve Bank of Dallas, said rates could rise as soon as "early next year." Referring to the long-awaited move up from record low interest rates, Fisher said he believes "liftoff" has been brought closer by signs the economy has improved.
Most members of the Federal Open Market Committee have indicated they expect rates to rise sometime in 2015. Economist Sean Snaith at the University of Central Florida says the report does little to change the Fed's assessment. "I think the jury is still out on the pace of economic growth and labor market improvement; the next six months should clarify the situation on both these fronts," said Snaith, the director of the university's Institute for Economic Competitiveness.
Similarly, Sterne Agee chief economist Lindsey Piegza says the report "continues to justify the Fed’s accommodative position." The Fed's next meeting is slated for mid-September featuring a news conference with Chair Janet Yellen and new economic projections from FOMC members. It should be interesting as Yellen works to strike a balance among the opposing viewpoints on the Fed.
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