The U.S. economy added 310,000 new jobs in July--100,000 more than analysts had expected--with workers benefiting from strong increases in wages, theLabor Department reported yesterday.
The economic data continued a string of reports pointing to increasing pressure on wages amid the tightest job market in decades, further fanning fears in financial markets that inflation is picking up.
The July unemployment rate, however, remained unchanged from June at 4.3 percent, suggesting companies are finding enough workers to fill all the new jobs being created.
Still, economists said the report puts even more pressure on the Federal Reserve Board, which is to meet later this month to consider interest rates. The higher potential for inflation results from continued strength in the economy nine years into an expansion, along with an acceleration in wages.
"At this late stage, 310,000 is awfully strong," said Hugh A. Johnson Jr., chief market strategist at First Albany Corp. "There's not much question among economists, strategists and investors that the Fed is going to raise rates August 24."
Both the bond and stock markets interpreted the data negatively, with traders driving up the yield on the benchmark 30-year Treasury to 6.17 percent, from 6.04 percent late Thursday, while the Dow Jones industrial average fell 79.79 points, to 10,714.03.
Most troubling to the markets, analysts said, was that average hourly earnings rose to $13.29 from $13.23 in June. The monthly jump of 6 cents followed a 5-cent gain in June and a 4-cent gain in May--indicating wages are rising at a faster rate now than they were a few months back.
"There are more jobs, and wages are increasing," said First Union Capital Markets economist Mark Vitner. "It does not appreciably change the economic outlook, but we are running out of people to hire." The July jobs gain followed an upwardly revised increase of 273,000 jobs in June and was well above the year-to-date monthly average of 208,000 new jobs.
The strongest gains in employment came among providers of services, including retail stores, restaurants and bars, where 260,000 of the 310,000 new jobs were created. Manufacturing, with a gain of 31,000 jobs, saw its first increase in employment since last summer, although the number of people working in factories is still below what it was in the spring of 1998.
While the overall unemployment rate was unchanged, joblessness among blacks rose to 8.8 percent, from a record low of 7.3 percent in June. By contrast, Hispanic unemployment fell to 6.2 percent from June's 6.8 percent. Teenage joblessness also fell, to 12.7 percent from 13.5 percent in June.
Yesterday's report was the third in a week showing an increase in the rate of wage growth.
Fed Chairman Alan Greenspan told Congress last month the Fed stands ready to raise interest rates at the first sign of inflation. Many economists believe those signs are now apparent, although some still think the Fed's interest rate-setting group may leave rates unchanged in August and raise them in October. The rate on overnight loans to banks was increased by a quarter percentage point in June.
But even with rising wages, there has been little evidence that companies are passing the cost along to consumers in the form of higher prices.
"Price increase is not generally a term we use," said Kelly Stanley, president and chief executive of Muncie, Ind.-based Ontario Corp., a collection of privately owned technology businesses.
"I don't think we've been hit by rampant employment costs," Stanley said, explaining that he was still able to lure new recruits to his company through "appropriate wages" and added benefits such as participation in a employee stock ownership plan.
One reason the economy continues to create jobs is an increasing number of workers who choose temporary or contract work, said Carl Camden, executive vice president of Kelly Services, a temporary-staffing agency.
The Troy, Mich., company has been hiring thousands of part-time and "fractional" workers who may be early retirees, students or employees who have been laid off from large corporations and who do not want full-time or permanent jobs, Camden said.
"That's a big pool for us," said Camden, whose firm hires the workers and then supplies them to businesses. "They make more for us on a per-hour basis than they did in their old jobs."
Camden said one of the fastest-growing segments of his work force is among highly skilled technical and professional workers who have chosen a "free-agency model" of hiring themselves out to the highest bidders.
"They go where the best jobs are," said Camden, who mentioned lawyers, information technology specialists and financial-services workers as among the most common people in this group. "In this economy, you can do that."
4.3 and Holding
Unemployment held steady last month, at 4.3 percent . . .
. . . while the number of jobs added to non-farm payrolls rose considerably:
SOURCE: Labor Department,