Finance: Jobs report beats expectations, unemployment rate returns to 16-year low
The sluggish pace of wage growth is a pressing issue in the jobs market right now.
The US economy added 209,000 jobs in July while the unemployment rate returned to a 16-year low of 4.3%, the Labor Department said in a report Friday.
Economists had forecast that 180,000 jobs were created during the month, according to Bloomberg. Hiring in June was revised to a faster rate than previously reported, by 9,000 jobs to 231,000.
The leisure and hospitality industry added 62,000 jobs last month, or nearly one in every three jobs created, led by restaurants. Retail hiring, which has slowed this year amid mass department-store closures, increased for the first time since January by 900 on net. General merchandise stores such as Walmart, which sell a variety of products, hired a net 4,200 workers.
Wage growth remained sluggish in July, with average hourly earnings increasing by 0.3% month-on-month — as expected — and 2.5% year-on-year (compared with 2.4% expected).
In theory, wages should be growing at a faster pace than this because the unemployment rate is so low, meaning that the supply of workers available for hire is limited.
However, Nomura's Lewis Alexander says wages are likely to stay low in this economic expansion relative to others partly because people aren't switching jobs as frequently as before.
"Labor market turnover, an important driver of wage growth, has recently flattened, even as the unemployment rate has continued to fall," Alexander said in a preview.
The share of working-age Americans who were part of the workforce rose to 62.9% from 62.8%. One group of workers that have been coming back to the jobs market at a quick rate is prime age workers between 25 and 54. Their labor-force participation rose to a new post-recession high of 78.7%, showing that the recovery in jobs has attracted them back into the workforce.