The U.S. economy has added jobs for 94 consecutive months, a record streak that shows no signs of waning, despite President Trump’s escalating trade war. Many business leaders have warned that the standoffs with China, the European Union and other major trading partners could cause layoffs if tariffs stay in place for an extended period of time.
“The basic story of the labor market has been a slow and steady recovery of month after month of impressive jobs gains,” said Michael Strain, director of economic policy studies at the right-leaning American Enterprise Institute. “I don’t see today’s number as a disappointment: 157,000 job gains is still impressive, given where we are in the business cycle.”
Hiring remained solid in most industries in July. Blue-collar jobs have grown sharply, with manufacturing adding 327,000 positions in the past year and construction adding 308,000. Transportation, mining and financial services did not hire much in July. Retail was also sluggish, with 7,000 job gains.
Economists will be watching to see whether these industries rebound later in the year. But Americans are optimistic about the economy, largely because of the many “we’re hiring” signs seen across the nation.
Wages remain the only red flag in the U.S. labor market. Despite many company executives complaining that they cannot find workers to fill open positions, wage growth remains sluggish. Typically, businesses raise wages when it’s difficult to find the talent they want, but annual wage growth remained at a tepid 2.7 percent, the Labor Department said. Wage growth has been stuck around that level for two years.
“The vast majority of the jobs we’re adding are in services, which tend to be low-wage sectors,” said Megan Greene, chief economist at Manulife Asset Management. She said that even though hiring has picked up in manufacturing, it’s still dwarfed by hiring in lower-wage industries.
Unemployment has fallen this year to its lowest level since 2000, and many economists predict unemployment will fall even further this year. If the jobless rate drops to 3.7 percent or below, it would be the lowest unemployment rate since 1969. African American and Hispanic unemployment rates are hovering around the lowest rates since the Labor Department began recording those statistics in the early 1970s.
The last time the U.S. economy had such low unemployment in the late 1990s, wage growth was substantially higher. The current wage gains are barely enough to cover the rising costs of food and housing for many Americans.
One theory for why wage growth is not picking up more is that many Americans gave up looking for jobs in the aftermath of the Great Recession, but people are now looking again as they see the strong job market. The employment-to-population ratio, a measure of how many adult Americans are working, is now 60.5 percent, up from 60.2 percent a year ago, a sign that more people are reentering the labor force.
The Trump administration cheered the jobs numbers on Friday as a sign its economic policies are continuing to boost growth and hiring.
“We’re going to create 2.6 million to 2.8 million new jobs in 2018,” said Larry Kudlow, Trump’s top economic adviser, on Fox Business shortly after the report came out.
If the pace of hiring continues at the same rate it has since January, the United States is likely to add about 2.6 million jobs this year, which would be the strongest since 2015.
The stock market rose on the news with the Dow gaining 136 points on Friday. Wall Street sees this as a Goldilocks jobs report with companies adding employees but pay not rising too quickly. The Federal Reserve is on track to raise interest rates two more times this year and several times next year. The Fed is unlikely to accelerate its rate hike plan if wages growth remains stagnant.