Published: Sun, August 05, 2018
Money | By Hannah Jacobs

United States unemployment fell to 3.9% in July

United States unemployment fell to 3.9% in July

"Non-farm payrolls increased by a more modest 157,000 in July but, with the gain in the preceding two months revised up by a cumulative 60,000, the labor market still appears to be in good health", said Paul Ashworth, chief USA economist at Capital Economics.

Economists had been expecting a far-stronger result of 190,000 new hires, but the July number looked smaller after strong upward revisions to gains in May and June.

The economy added 157,000 jobs last month as the nation's unemployment rate dropped to a near-record low of 3.9 percent. The economy grew at 4.1 percent during the second quarter, its fastest place in almost four years.

The employment picture's been pretty rosy lately, with average job growth above 200,000 a month since mid-spring and more people coming back into the labor market. Job gains, low unemployment, and flexibility in labor markets have lifted household optimism about the jobs market to its highest level since the early 2000s. The number of unemployed persons declined by 284,000 to 6.3 million.

Wages remain the only red flag in the USA labor market. The annual increase in wages was unchanged at 2.7 percent in July. Economists were watching manufacturing closely for signs of a drag from the Trump administration's escalation of trade tensions with China and allies. Meanwhile, the nation's labor participation rate held steady at 62.9 percent - which is exactly where it was when US president Donald Trump took office eighteen months ago.

Strong demand from consumers and businesses sharply reduced the stockpiles of goods held on many store shelves and warehouses. Faucher writes that as that happens, job growth will slow down because businesses will find it more hard to recruit new hires. The economy is now entering its tenth year of expansion, and hiring has actually accelerated this year compared with 2017, surprising most analysts. Initial jobless claims were near a 50-year low in the week the BLS conducted its survey for the jobs report and haven't added up to more than 300,000 since March 2015. Retail payrolls rebounded by 7,100 jobs last month after losing 20,200 in June.

Employment in food services and drinking places continued to trend up over the month (+26,000).

Transportation payrolls dropped by 1,300 jobs last month, with transit and ground transportation employment declining by 14,800 jobs. The views expressed in this column are the author's own and do not reflect those of Berenberg Capital Markets, LLC. It is not a solicitation to make any exchange in commodities, securities or other financial instruments.

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