The American economy roared ahead last month, as employers added 255,000 jobs, a bigger-than-expected gain that suggests the country’s growth rate may be more robust than thought just two months ago.þþþThe Labor Department report for July had been eagerly anticipated on Wall Street, in Washington and on the campaign trail after conflicting signals in recent months about the economy’s trajectory.þþþHiring in May was much weaker than what economists had expected, while a big rebound in June similarly caught the experts off-guard. July’s data suggests an economy that is gaining momentum after a spring slowdown.þþþ“This will be a validator,” said Michael Gapen, chief United States economist at Barclays, in an interview before the release of the data. “Another solid gain in July would suggest that May’s numbers were an aberration.”þþþThe unemployment rate was flat at 4.9 percent. Economists had been expecting a gain of about 180,000 jobs, with a fall in the unemployment rate to 4.8 percent.þþþþþþJune’s gain was revised upward by 5,000 jobs, and May by 13,000. The combination of better gains in the spring and July’s jump in hiring suggest that the Federal Reserve may take a fresh look at raising interest rates when it meets in September.þþþThe Fed said in July, after the most recent meeting of its policy-making committee, that the economy was growing more strongly and there were fewer clouds on the horizon, suggesting it was giving greater consideration to rate increases later this year.þþþThe strength of job growth in July is likely to reinforce that assessment. But it still may not be sufficient for the Fed to raise rates in September.þþþThe July jobs data is certain to reverberate not only for policy makers at the Fed, but also for Hillary Clinton and Donald J. Trump as November’s presidential election draws closer.þþþTepid data released last week for second-quarter growth offered an opening for Republicans to question Democratic arguments that the recovery was delivering meaningful gains for most Americans.þþþAlthough the Labor Department will release three more months’ worth of monthly hiring data before voters go to the polls on Nov. 8, the buoyant picture presented for July comes at a moment in the campaign when polls are in flux.þþIndeed, there was ammunition for both candidates in Friday’s report.þþThe labor force participation rate ticked up by 0.1 percentage point, compared with 62.7 percent in June.þþþAlthough that is an improvement from late last year, the proportion of Americans who are working remains close to lows last seen in the late 1970s. That only underscores how many workers remain on the economic sidelines as the recovery enters its eighth year.þþþþþþOn the other hand, wages are showing signs of life, with average hourly earnings rising 0.3 percent in July, bringing the 12-month gain to 2.6 percent. As the unemployment rate has fallen, some employers have been forced to raise salaries to retain their best workers and attract new ones.þþþWhat’s more, increases in the minimum wage in many states recently, plus increases in the lowest-tier salaries by big employers like Walmart, Target and Aetna, are beginning to ripple through the broader work force.þþþOn Monday, Minnesota raised its minimum wage by 50 cents, requiring large employers to pay workers $9.50 an hour while smaller firms must pay at least $7.75. On July 1, similar increases went into effect in Maryland, Oregon and the District of Columbia.þþþStill, a two-tier job market has emerged in many ways across the United States, with workers in the same region facing radically different conditions depending on their level of education and skills.þþþIn San Francisco, even the most junior software engineers hired at Sunverge, a maker of energy storage systems for solar electricity users, command starting salaries of just over $100,000. A more experienced director of software development might earn up to a quarter-million dollars a year.þþþHowever, a little more than 60 miles to the east at Sunverge’s assembly plant in Stockton, Calif., where the unemployment rate is 9 percent, new blue-collar workers can expect to earn about $14 an hour, or $29,000 a year. That’s $4 more an hour than California’s minimum wage of $10.þþþSunverge is bulking up in both cities; the firm’s work force is expected to grow to about 100 by the end of the year, from 70. But hiring technical talent is a much more time-consuming process, said Stu Statman, Sunverge’s head of engineering.þþþ“It doesn’t seem like it’s that hard to find good factory workers in Stockton,” he said. “In San Francisco, if you’re talking about software engineers or developers, it’s very hard. It takes a long time, and there’s a huge amount of hunger out there for people with these skills.”þþþþþþOn the policy-making front, William C. Dudley, the president of the Federal Reserve Bank of New York and an influential adviser to Janet L. Yellen, the Fed’s chairwoman, said on Sunday that current economic conditions called for “caution in raising U.S. short-term interest rates.”þþAmong his reasons: The Fed’s current policy is less accommodative than it may seem, because global interest rates have declined; the weakness of the rest of the world poses a risk to domestic growth; and if the American economy should falter, the Fed is relatively constrained in its ability to help. Other officials also have sounded a cautious note in recent weeks, although insisting they have not decided against a rate increase later this year.þþþMs. Yellen is scheduled to speak this month in Wyoming, and her remarks will be closely watched for hints of the Fed’s direction.þ
Source: NY Times
