U.S. employment rose by 215,000 jobs in July and the unemployment rate held steady at 5.3 percent, the Labor Department said Friday. The report was forecast to show employers adding 223,000 jobs last month and the unemployment rate was expected to remain at 5.3 percent, said analysts polled by Thomson Reuters.
Economists are seeing a favorable trend in 2015. This year is the first since the Great Recession [2007-09] that has shown strong growth in professional services. “You finally saw computer science, architect and engineering jobs going up this year, the kind of positions allocated to college graduates,” said William Spriggs, chief economist at the AFL-CIO.
Throughout the post-recession recovery economists have worried that the jobs created have overwhelmingly been in relatively low-paying sectors of the economy, including retail and fast food. But high-end jobs in professional services and technical fields continued to show growth, increasing by 27,000 in July, slightly higher than the average monthly gain of 25,000 over the prior 12 months.
Information technology continues to see strong growth across the retail, insurance and enterprise space as companies upgrade their mobile infrastructure and software applications, said Sal DiFranco, executive vice president at recruiting firm DHR International. Experts are also seeing strong growth in the device and wearable market space, as well as engineering and sales positions.
Some of the hottest markets right now for jobs are Atlanta, Chicago, Dallas, Miami, San Francisco and San Jose, California, DiFranco said.
Although state and local government is a big place that absorbs college-educated workers, economists have yet to see solid growth in state and local employment positions. “We’re still down in public school teachers,” Spriggs said. “A lot of the jobs in the public sector were management jobs, and we’re just not allocating people to the right thing, and that’s because we’re not at full employment."
Participation Rate Remains Near 40-Year Low
The number of Americans who have been out of work for 27 weeks or longer was essentially unchanged last month, at 2.2 million, constituting 26.9 percent of the unemployed. Meanwhile, many Americans who work part-time jobs want to work full time, and nearly two-thirds who are able to work have dropped out of the labor force, the highest proportion opting out of the workforce since the 1970s.
The unemployment rate has been stuck between 5.5 percent and 5.3 percent since earlier in the year as the labor-force participation rate remains at its lowest level since October 1977, a 38-year low. That rate was unchanged, at 62.9 percent, from the prior month, according to the report released Friday.
The participation rate still hovers at a nearly 40-year low because improvements in the labor market are being offset by the structural headwinds of demographic change: Baby boomers are retiring and young professionals are going back to school.
Another of the many bright spots in the July report: The average hourly earnings for private-sector workers rose by 5 cents to $24.99. For most workers, however, real wages have fallen or remained flat for more than three decades.
The Federal Reserve
A robust jobs report offers further evidence the U.S. economy is on strong enough footing to absorb the impact of a Federal Reserve interest rate hike, which many economists expect in September. The upward adjustment would be the first in nearly a decade. Interest rates remain at historic lows since the financial crisis in 2008.
The U.S. had previously added at least 200,000 jobs per month for 12 consecutive months following February’s strong jobs report, a feat not seen in 20 years. However, the reports over the last two quarters haven’t been as stellar.
“This is very consistent with what we’ve seen over the course of this recovery. On the one hand it has not been generally very robust, but on the other hand, it has been sustained,” said Mark Hamrick, Washington bureau chief at Bankrate.com. “At this point in the recovery, people should appreciate that the recovery is continuing, in part because of the Fed’s monetary policy.”
Many economists, however, are still not seeing the accelerated growth that suggests the economy needs to slow -- or that businesses are experiencing wage pressure.
“Now’s not the time to increase interest rates,” Spriggs said. “With wages moderating, we don’t think we’re going to see the labor-force participation rate picking up.”
After Friday's jobs report, there is just one more monthly unemployment reading ahead of the Federal Reserve’s next meeting on September 16-17. The financial markets reacted with mixed emotions to the July numbers because the report didn’t completely solidify whether the Fed would actually hike rates in September, or hold off until later.
"This truly was as middle of the road as you could get, and it’s not providing a ton of new information to help read the tea leaves of which way the Fed is leaning,” said Mike Baele, managing director at U.S. Bank Wealth Management in Portland, Oregon. “It’s almost a disappointment that it wasn’t tilted one way, or another.”
But this report slightly “increases the odds” of a September rate hike because it wasn’t a complete miss, Baele said.
According to a Wall Street Journal poll of 60 business and academic economists, 82 percent surveyed in July pegged September as the most likely time for the Fed’s first rate hike. Just 15 percent said the Fed would wait until December.
If the next report for August shows solid job gains above 200,000, with the unemployment rate holding steady, or down slightly, then that’s enough to “seal the deal” for the Fed to raise rates as early as mid-September, said Gus Faucher, senior macroeconomist at PNC Financial Services Group.
The August employment report for is due out on September 4.
Energy Job Losses
To be sure, pockets of the U.S. job market are suffering. The energy industry has been hit hard of late. The precipitous drop in oil prices over the last year has led to job losses related to the oil and mining sector as investment in those areas declines. And economists expect the job losses to continue.
In July, employment in mining fell for the sixth month in a row. Since a recent high in December 2014, employment in mining has declined by 78,000, with losses concentrated in support activities for mining.