U.S. employers add 215,000 jobs in July, unemployment rate steady at 5.3%
Strong pace of job growth could set stage for interest rate hike
U.S. employers added a solid 215,000 jobs in July, signalling a steadily rising job market and likely nudging the U.S. Federal Reserve closer to raising interest rates in September.
The U.S. Labour Department also says the unemployment rate held at a relatively low 5.3 per cent for a second straight month.
Monthly job growth has averaged 211,286 so far this year, indicating that employers are confident that the six-year recovery from the recession can sustain strong consumer demand and require more workers.
Hiring has remained robust even though the economy's overall growth rate has been subpar and pay raises have been modest for many workers. Average hourly earnings in July increased just 2.1 per cent from a year earlier.
James Marple, senior economist at TD Economics, said slow wage growth has been a "fly in the ointment," but pointed to growth in average weekly earnings, which was more robust than hourly wage growth.
Average weekly earnings rose 0.5 per cent in the last year, because average weekly hours at work were growing, with a steady 3.4 hours a week of overtime reported in the manufacturing sector, according to the U.S. Labour Department.
Setting the stage for rate hike next month
The Fed has held its key short-term rate near zero since late 2008, a policy introduced after the financial crisis to try to energize the economy through stronger borrowing, investing and spending. Now, more than a half-dozen years into the recovery, Fed Chair Janet Yellen has suggested that the economy not only can tolerate but needs higher rates.
Paul Ferley, assistant chief economist at RBC Economics, said the data sets the stage for a rise in the Fed's benchmark interest rate in September.
"This followed earlier data releases that point to second-quarter GDP growth likely being revised upward to 2.9 per cent from the 2.3 per cent indicated in the advance estimate for the quarter. This pace of growth is expected to be sufficient to return the Fed to tightening mode," he said in a note to investors.