US companies added 210,000 workers in July, the Labor Department reports. The gain matches Econoday.com’s consensus forecast. Although last month’s increase in private-sector payrolls was modestly below June’s 227,000 gain, today’s update continues to reflect a solid 2%-plus trend advance in year-over-year terms. The annual pace is still decelerating, but fractionally so. The bottom line: the labor market continues to expand at a healthy pace and for the moment the trend looks poised to endure. In turn, the case for a near-term rate hike by the Federal Reserve looks a bit stronger today.
Nonfarm payrolls increased 2.43% last month vs. the year-earlier level. That’s the lowest annual rise in nine months, but the decline from February’s year-over-year peak of 2.71% has been gradual. Given the bullish signals in jobless claims lately, which have recently touched 40-year lows, it’s reasonable to assume that private payrolls will continue to increase at a 2%-plus rate for the foreseeable future. In turn, there’s enough forward momentum in that pace to keep the jobless rate ticking lower.
Accordingly, business-cycle risk for the US economy remains low. That’s been true for some time, of course, as the periodic macro updates at CapitalSpectator.com have emphasized (see here and here, for instance).
“Trend job growth is rock solid,” says Ryan Sweet, a senior economist at Moody’s Analytics. “It’s more than sufficient to continue to chip away at the slack that’s left in the job market.”
In turn, today’s data suggests that the Federal Reserve remains on track to start raising interest rates, if only slightly, in the near term.
“I think there is a high bar right now to not acting, speaking for myself,” Atlanta Fed President Dennis Lockhart recently told The Wall Street Journal. “It will take a significant deterioration in the economic picture for me to be disinclined to move ahead.”
Based on today’s numbers, there are few signs of deterioration in the economy’s capacity to mint new jobs.
“If you thought that the Fed was going to go in September, this report [today’s payrolls release] would suit that thematic nicely,” Tom Porcelli, chief US economist at RBC Capital Markets, tells Reuters. “I don’t think anything has changed in that regard. I think it’s another step toward the eventual lift-off.”