Job creation buoys hope for continued economic growth

Better-than-expected job market numbers for July signaled continued growth, calming months of worries that the U.S. economy was braking.

Stocks jumped Friday to record highs, and most economists said last month’s gain of 255,000 payroll jobs squelched fears that had been generated by slow growth in the second quarter.

The strong job creation, a national unemployment rate that stayed at a low 4.9 percent, and a continued increase in average hourly pay were “everything you could have asked for, maybe more,” said Michelle Meyer, head of U.S. economics at Bank of America Merrill Lynch.

July’s employment gains joined the 292,000 added in June, according to the Labor Department.

Those gains also revived talk that the Federal Reserve would again raise interest rates by the end of the year. The last Fed increase — a quarter point increase in a key interest rate last December — brought to an end to seven years of near-zero rates.

Speculation that the Fed would raise the rate again in September proved wrong in the face of slow growth in China and Europe, as well as Britain’s Brexit vote to leave the European Union. All combined to boost the dollar and trim domestic economic growth.

“These job numbers are good enough to keep the Fed on track for a December rate increase despite sluggish GDP growth in the first half of this year,” said Scott Anderson, with Bank of the West.

At least on Friday, Wall Street cheered. The Dow Jones industrial average rose 1.04 percent; the Nasdaq composite index rose 1.06 percent, and the Standard & Poor’s 500 index rose 0.86 percent.

Analysts said the strong jobs reports calmed initial Brexit fears — that Britain’s vote would hurt U.S. hiring and growth.

In Kansas City, as in many places around the country, the employment picture appears “constructive,” said Dan Heckman, national investment consultant at US Bank Wealth Management. “You see businesses, especially in service occupations, struggling to find labor, skilled and nonskilled. ‘Help Wanted’ signs are front and center.”

Democrats generally said the strong data should undercut Republicans’ political arguments that the economy was tanking. But some conservative groups made that case. The Job Creators Network pointed out that the second quarter’s growth rate of 1.2 percent was the weakest start to a year since 2011.

The network also said that the real unemployment rate is 9.5 percent, if the low labor force participation rate is considered.

The report said the national labor force participation rate edged up to a recent high of 62.8 percent, a figure that still remains low by historic standards.

But, “since most of the new workers were employed, the unemployment rate held steady,” noted Harry Holzer, former chief economist with the Labor Department and author of “Where Are All the Good Jobs Going?”

The brightest sign in the July report for most U.S. workers was that average wages rose 2.6 percent over the last 12 months. Minimum wage increases in some states and cities, coupled with higher wages paid by large employers such as Wal-Mart, Target and Aetna, are beginning to affect the total data.

Analysts also noted that recent college graduates are finding jobs, one indicator of robust hiring. Staffing companies also are reporting steady hiring in well-paying jobs — positions that pay in the $50,000 to $150,000 range.

Even optimistic analysts agreed, though, that the Labor Department’s broadest measure of unemployment shows that some workers continue to struggle.

The estimate of workers who want full-time jobs but have had to settle for less or were too discouraged to keep looking was figured at 9.7 percent in July. That rate was 0.1 percentage point higher than in June, but lower than 10.4 percent published in July 2015.

This story was originally published August 5, 2016 at 4:46 PM with the headline "Job creation buoys hope for continued economic growth."