America's labor market is surging again after a weak spring, with government data released Friday showing the economy added a healthy 255,000 jobs last month.
Wall Street posted another record high on the news, as the gains reassured investors that the recovery has momentum despite slow growth in the broader economy.
Standard & Poor's chief U.S. economist Beth Ann Bovino said the job market delivered a "solid sequel” to the blockbuster hiring in June, leaving weak performance in May a "distant memory.” The Labor Department increased its estimate of job growth over both those months by 18,000. The unemployment rate remained unchanged in July at 4.9 percent.
"The economy continues to power forward despite the uncertainty and geopolitical risks out there in the world,” said Chris Rupkey, chief financial economist at MUFG Union Bank. "The economy is moving forwards, not backwards.”
The Standard & Poor's 500-stock index rose 19 points, or 0.9 percent, to close at an all-time high of 2,183. The tech-heavy Nasdaq also made history with a 55-point gain, or 1 percent, to 5,221. The blue-chip Dow Jones industrial average rose 191 points, or 1 percent, but fell shy of a record close.
The jobless rate has fallen by more than half since peaking at 10 percent in the aftermath of the Great Recession seven years ago. Many economists have begun to wonder whether the unemployment rate can fall much further. In addition, analysts have cautioned that job growth will eventually slow as businesses fill their open positions — still a positive sign for the economy.
In July, hiring was strong across almost every major industry. Professional and business services added 70,000 jobs, including computer systems designers, architects and consultants. Health-care employment rose by 43,000, while the financial industry gained 18,000 jobs. Even the government hired more workers, adding 38,000 positions, primarily in local education. However, mining continued to suffer job losses.
The remarkable strength in the labor market has not been enough to overpower the broader forces holding back the economy. Growth clocked in at a disappointing 1.2 percent during the second quarter, just faster than the stall speed registered over the winter. The United States may have stood firm in the face of turmoil emanating from China and uncertainty surrounding Britain's decision to leave the European Union, but the recovery has yet to take off.
Part of the reason is a disconnect between business investment and hiring at home. Tim Hopper, chief economist at TIAA Global Asset Management, noted that in a typical recovery companies hire more workers, who then use their paychecks to buy more goods and services. An increase in demand encourages businesses to spend more on equipment and technology, creating more jobs in a virtuous cycle of economic growth.
In this recovery, however, businesses have been willing to hire but loathe to invest, restraining the pace of the expansion.
"We have not seen that engagement this time," Hopper said. "That's the fundamental problem."
The tepid economy has been a key issue on the presidential campaign trail, with populist frustration over stagnant wage growth and the slow grind of the recovery fueling support for unconventional candidates such as Republican nominee Donald Trump and former Democratic contender Sen. Bernie Sanders.
Trump has pledged to cut corporate tax rates, renegotiate free trade deals and label China a "currency manipulator.”
"The era of economic surrender will finally be over,” Trump said during a campaign event in Pennsylvania in June.
Trump is slated to deliver an economic address in Detroit on Monday. Though he handily won the GOP primary in Michigan, voters there supported President Obama in 2008 and 2012.
Democratic nominee Hillary Clinton has attempted to emphasize the progress since the financial crisis while also acknowledging the anger many workers feel over the uneven recovery. She has proposed investing in infrastructure — a call Trump also recently backed — instituting paid family leave and raising the minimum wage, among other things, to boost job creation.
"None of us can be satisfied with the status quo,” Clinton said in her nomination speech in Philadelphia last month. "We're still facing deep-seated problems that developed long before the recession and have stayed with us through the recovery.”
Friday's data also showed a surprising increase in wage growth in July, evidence that one of the most stubborn roadblocks in the recovery could finally be in the rearview mirror. Wage gains had been stuck at about 2 percent for several years, but growth has picked up in recent months. In July, average hourly earnings jumped 8 cents to $25.69, up 2.6 percent over the past year.
Bankrate.com senior economic analyst Mark Hamrick said a healthy labor market coupled with solid — though not spectacular — growth could bolster support for Clinton this fall.
"It is hard to construct a realistic scenario where the U.S. economy looks substantially different from now when voters head to the polls,” he said. "As long as the economy remains relatively firm through November, that would seem to bode well for Hillary Clinton, who is seen offering continuity and, dare I say, a steady hand.”