The job market’s winning streak continued in July as the economy added 215,000 positions, according to government data released Friday, providing more evidence of an economy that is slowly but steadily returning to normal.
The Labor Department reported that hiring was strongest in the retail and health care sectors, while the mining industry continued to shed jobs. The unemployment rate remained unchanged from the previous month at 5.3 percent.
The solid yet unremarkable report indicated that the recovery is chugging along. Hiring came in just shy of analysts’ expectations, and there was little in the details of the data to be concerned about: Wages nudged up in July, and workers logged more hours. The labor force expanded slightly, and youth unemployment dropped.
“I think it’s a sign of progress that we’re seeing decent job gains every month,” said Scott Anderson, chief economist at Bank of the West. “Boring is good.”
Wall Street opened lower on the news and slid throughout the morning. The major U.S. stock market indexes were down more than half a percentage point shortly before noon.
The jobs report provides a critical piece of information for the Federal Reserve as it considers whether the economy can withstand an increase in its benchmark interest rate. The nation’s central bank generally raises its target rate when it is trying to rein in an overheating economy and lowers it when it wants to stimulate activity. In the wake of the financial crisis, the Fed slashed its target rate to zero, a dramatic move intended to spur consumer demand and business investment.
But seven years later, the central bank’s target rate is still at zero. Fed Chair Janet Yellen has said she expects the rate will rise before the year is over. In its most recent policy statement, the central bank said it will move once it is “reasonably confident” that inflation is moving toward its goal of 2 percent and it sees “some” further improvement in the labor market.
Many on Wall Street have parsed those remarks as implying that the Fed could act as soon as September, when it holds its next meeting. But others believe the central bank will wait until December -- or even until 2016 -- to be sure that the recovery is on track. Friday’s jobs report is unlikely to change any minds.
"We view this report as easily clearing the hurdle needed to keep the Fed on track for a September rate hike," Rob Martin, an economist at Barclays, wrote in a note to clients. "We view the bar for not moving as now much higher."
In an interview with the Wall Street Journal this week, Atlanta Fed President Dennis Lockhart said that he was ready to move in September as long as the economic data did not prove disappointing. But Fed Gov. Jerome Powell struck a more cautionary tone in comments to CNBC, citing the need to evaluate Friday’s jobs report among other forthcoming statistics before deciding on timing.
"The sooner the Fed moves, the more room it creates to take action during the next downturn," said Joseph Lake, global economist for The Economist Intelligence Unit.
One of the reasons the Fed has been so cautious is because previous growth spurts in the recovery failed to take hold. Economic growth slowed markedly during the first quarter of the year, and monthly hiring fell below the baseline of 200,000 new jobs that many analysts believe is the bar for for a healthy labor market.
Friday’s jobs report served as confirmation that the dip was just a blip. Economists pointed to hiring gains across a broad swath of industries, including an increase of 15,000 manufacturing jobs. Average hourly earnings in July rose 5 cents to $24.99, up 2.1 percent over the year. The government also upped its previous estimates of the number of jobs added in May and June by 14,000.
If the pace of hiring keeps up, the unemployment rate will fall below 5 percent for the first time since 2008, according to Joseph LaVorgna, chief U.S. economist at Deutsche Bank. That would mean the labor market is operating beyond what economists consider full employment, raising the risk of higher inflation.
“This is probably the primary reason that Fed policymakers want to act on interest rates this year,” LaVorgna wrote in a research note. However, he noted that “there is still little evidence of any wage pressure.”