Non-farm payrolls rose 164,000 in July as the unemployment rate remained unchanged at 3.7%, the Labor Department reported on Friday. Economists surveyed by IFR Markets had predicted non-farm payrolls would rise 165,000 with the unemployment rate slipping to 3.6%.
“We see 164,000 as a good number, the key being that at these low levels of unemployment there aren’t enough people to fill all these jobs,” said Ken Potts, senior vice president and portfolio manager at Fiera Capital. “It suggests the economy is healthy. It shows that jobs are plentiful while wages are OK, not off the charts, but improving.”
The Labor Department lowered its number for June’s non-farm gains by 31,000 to 193,000 and cut the figure for May’s gains 10,000 to 62,000.
The report came hard on the heels of the Federal Reserve’s decision on Wednesday to lower interest rates by 25 basis points, the first cut in over 10 years.
Labor said there were notable job gains last month in professional and technical services, health care, social assistance and financial activities.
“This is a strong report — the labor force participation rate rose again, the broader measure of unemployment U-6 is almost at the low reached in Q4 2000 and wages continue to rise steadily,” said Charles Seville, co-head of Americas Sovereigns at Fitch Ratings. “The weak spot is the manufacturing sector, where the pace of hiring has been slowing and hours worked continued to fall. We believe this is linked to trade concerns rather than being a harbinger of broader weakness in the U.S. domestic economy, and that the Fed is not about to embark on a major easing cycle.”
According to Labor’s establishment survey, July’s rise in non-farm payrolls was in line with average employment growth in the first six months of this year. In 2018, employment gains averaged 223,000 per month.
Average hourly earnings rose 8 cents to $27.98, after an 8-cent gain in June. Over the past 12 months, average hourly earnings have increased 3.2%. In July, average hourly earnings of private-sector production and nonsupervisory employees rose 4 cents to $23.46. The average workweek fell 0.1-hour to 34.3 hours in July. The average workweek of private-sector production and nonsupervisory employees declined by 0.1 hour to 33.5 hours.
According to Labor’s household survey, the number of unemployed persons was little changed at 6.1 million. In July, the number of those unemployed less than five weeks rose 240,000 to 2.2 million. The number of long-term unemployed, those jobless for 27 weeks or more, fell 248,000 to 1.2 million last month; the long-term unemployed accounted for 19.2% of all those unemployed.
The labor force participation rate was 63.0%, and the employment-population ratio was 60.7%. Both measures were little changed over the month and over the year, Labor said.
“This is a report that is status quo for the Fed,” Subadra Rajappa, head of U.S. rates strategy at Societe Generale told Bloomberg Television. “The focus is going to be on all the other events and the rhetoric around tariffs going forward.”
Also Friday, the Commerce Department said the U.S. international trade deficit decreased in June to $55.2 billion from $55.3 billion in May, originally reported as a $55.5 billion deficit.
Economists polled by IFR Markets had forecast a deficit of $54.6 billion in June. The goods deficit decreased $800 million in June to $75.1 billion while the services surplus decreased $500 million in June to $20.0 billion.
Consumer sentiment remained unchanged in late July from the mid-month reading, according to the latest report from the University of Michigan. Its index of consumer sentiment was 98.4 in July unchanged from the preliminary July reading and up from June’s final reading of 98.2
Economists polled by IFR Markets had forecast a reading of 98.4 for late July.
“Economic confidence has been remarkably stable since the start of 2017, despite ongoing trade uncertainties. The resilience displayed has been primarily due to a renewed sense of personal financial optimism. Indeed, recent surveys have recorded the most favorable net personal financial expectations since May 2003,” the University said in a statement. The University added that positive job and income prospects, gains in net household wealth and low inflation all bolstered optimism even as most consumers don’t anticipate a rapid acceleration in income growth rates or a significant change in inflation and unemployment rates.
"With further deterioration in the latest reports for business investment, housing, and manufacturing, not to mention still sluggishly low inflation, the latest escalation in 'international risks,' particularly stemming from another round of tariffs, is the perfect equation to welcome a second-round reduction in rates sooner than later," said Stifel’s chief economist Lindsey Piegza.
