July’s solid job growth shows economic recovery is advancing
July’s employment report showing net growth of 209,000 jobs was below expectations and a sharp tail-off from the previous month, but still represents a solid gain that shows the recovery from the Great Recession is advancing, economists said.
“It’s better,” Kevin Logan, chief U.S. economist at HSBC Bank, said of an economy growing at about a 2.5% annual rate. “It could be much better, but at least it’s improving — even if slowly.”
July was the sixth straight month that the economy added more than 200,000 net new jobs. That hasn’t happened since the dot-com boom in 1997.
The unemployment rate ticked up by a tenth of a percentage point to 6.2% after hitting its lowest level since 2008 in June. But the rate still was down significantly from 7.3% a year earlier.
The Labor Department also slightly revised up the job growth figures from May and June by a total of 15,000 positions.
That means the economy has added an average of 245,000 net new jobs over the last three months and about 230,000 a month so far this year. The economy averaged 194,000 net new jobs a month in 2013.
But the jobs report also demonstrated that the labor market still has some weak points.
The labor force participation rate remained at 62.9% in July, near an all-time low. The number of people out of work for more than six months was essentially unchanged last month at 3.2 million. And wage growth continued to be weak.
Average hourly earnings rose just a penny to $24.45 and only increased 2% over the previous year, barely keeping up with inflation.
“Until we see real wage growth, we’re not really seeing the improvement we need to see,” said Tim Hopper, chief economist for TIAA-CREF, one of the nation’s largest money managers.
Given the weakness in some of those other labor market indicators, Hopper said, Federal Reserve policymakers are unlikely to start raising the central bank’s key short-term interest rate until late next year.
Jason Furman, chairman of the White House Council of Economic Advisers, said the jobs report was encouraging but noted in a blog post that there was more work to do.
“Looking at a range of indicators of unemployment, it is clear that we are far into the economic recovery — and that progress has been broadly shared — but we are not all the way there yet,” he said.
Still, Friday’s jobs report was another sign that the the recovery is back on a positive track after a scare during the winter.
The economy grew at a robust 4% annual rate from April through June, the Commerce Department reported this week.
Much of that growth came from consumers and businesses catching up on activity lost during the first quarter, when the economy sharply contracted at a 2.1% annual rate.
Other economic data also are improving. Consumer spending rose 0.4% in June, up from 0.3% the previous month, the Commerce Department said Friday.
Personal income also increased 0.4% in June, the same pace as in May.
Consumers in July said they were more positive about their current financial situation than at anytime since 2007, according to survey results released Friday.
Still, the monthly consumer confidence index from the University of Michigan and Thomson Reuters dropped to 81.8 last month from 82.5 in July.
“The slow and uneven pace of the recovery in jobs and incomes during the past five years has made consumers unwilling to put much stock in favorable economic forecasts until repeatedly confirmed by positive realizations,” said Richard Curtin, the survey’s chief economist.
“What may have been termed a skeptical viewpoint in an earlier era is now regarded as a more practical ‘show-me’ state of mind,” he said.
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