U.S. employers added 207,000 jobs in July, the government said yesterday in a report cited as evidence that the economy's momentum from...
WASHINGTON — U.S. employers added 207,000 jobs in July, the government said yesterday in a report cited as evidence that the economy’s momentum from the spring was carrying into the second half of the year.
The job gains were enough to keep the unemployment rate at a 40-year low of 5 percent. In addition, the Labor Department lifted its estimates of job growth for the previous two months by a combined 42,000.
“The economy is on the cusp of a significant acceleration,” Goldman Sachs said in its weekly economic wrap-up.
UBS chief economist Maury Harris said the jobs report suggested the economy was growing faster than a 4 percent annual rate last month, compared with the 3.4 percent pace it registered in the April-June period.
The increase in jobs and the steady unemployment rate “are proof positive that the economy is still operating at full employment,” said Richard Yamarone, an economist with Argus Research. He read the new employment numbers as supporting more-modest growth of 3.2 percent.
In another sign of economic strength, workers earned more last month. Production workers made an average of $16.13, up from $16.07 in June. That was the largest such increase in a year; there has not been a larger one since February 2003.
Mark Zandi, chief economist of the consulting company Economy.com, called the pay gains “a sign that workers are gaining some negotiating power” as the pool of available workers shrink. That, in turn, is likely to prompt businesses to raise prices, he said, which could potentially trigger an inflationary wage-price spiral.
Zandi predicted that the Federal Reserve’s Open Market Committee, which has raised short-term interest rates one-quarter of a point at each of its last nine meetings — to 3.25 percent now — would stop only when it got to 4.5 or 5 percent. The committee meets Tuesday.
Yamarone also predicted that “it will be onward and upward for the Fed’s tightening cycle.”
Concern about continued Fed tightening helped spark a rise in bond-market yields yesterday, which in turn will push mortgage rates and other interest costs higher.
Other analysts said the new jobs data did not foreshadow higher inflation.
Moody’s Investors Service said the report “was constructive for both the economy and corporate earnings.” Personal income is growing fast enough that people will make more purchases, Moody’s said. Businesses, in turn, will be able to maintain profits without raising prices, it said.
The average workweek remained steady at 33.7 hours, “a sign of caution among employers,” said Steven Wood, chief economist at Insight Economics.
The manufacturing sector underperformed the rest of the economy, as is often the case. Hours worked at manufacturing companies declined for the fifth month in six, said Charles McMillion, chief economist for MBG Information Services.
He noted that the heftiest employment gains last month were in fields that, unlike manufacturing, have little exposure to outsourcing. They included health care, restaurants and bars, schools, clothing stores, department stores, real estate and car dealerships.
Bernard Baumohl, executive director of The Economic Outlook Group of Princeton Junction, N.J., said the economy faced a 25 percent risk of a recession next year and a significant risk of a “growth recession” as a result of rising interest rates, higher energy prices and ever-greater consumer debt.
The economy keeps growing during a “growth recession,” but too slowly to prevent unemployment from rising.
Los Angeles Times staff writer Warren Vieth contributed to this report.