US economy adds 164,000 jobs in July

US economy adds 164,000 jobs in July

US hiring continued at a steady pace in July and wages rose at a healthy clip, but a revision to the previous month’s job gains is likely to keep spurring debate over the outlook for interest rates through the rest of 2019.

Non-farm payrolls rose by a net 164,000 in July, the Bureau of Labor Statistics revealed on Friday, matching Wall Street’s median forecasts. That marked a slowdown from downwardly revised 193,000 additions in June, which previously stood at 224,000.

Professional and technical services, health care, social assistance and financial activities were the sectors that saw notable job gains, the BLS noted. Manufacturing employment, which may be one of the groups most at risk from fallout of the US-China trade war, was “little changed” with a rise of 16,000 jobs last month.

The unemployment rate held steady at 3.7 per cent, near 50-year lows and in line with expectations.

There was more encouraging news for workers, with average earnings rising 0.3 per cent month-on-month in July. That topped expectations for a 0.2 per cent increase, and the BLS also revised June’s monthly pace higher by one-tenth of a percentage point to 0.3 per cent.

That saw average earnings grow at a 3.2 per cent year-on-year pace in July from 3.1 per cent the previous month and the highest level since April.

Economy watchers may be left to balance the rise in earnings with the overall revisions to the non-farm payrolls. The adjustement to the June figures, as well as a downward revision of May’s number by 10,000 to 62,000, imply softer hiring in the lead-up to summer than previously thought.

James Knightley, chief international economist at ING, said the July report showed US companies still have an appetite to hire.

“We continue to argue that a slowdown in hiring should be expected. This is the longest US economic expansion since records began in 1854 with unemployment close to 50-year lows …so it is unsurprising that companies complain that difficulty finding suitable workers is the biggest constraint on hiring,” he said.

The report, again showing the relative resilience of the domestic labour market, arrived towards the end of a volatile week for investors who are juggling an escalation in the US-China trade war and confusion about the outlook for US interest rates with a mixed batch of economic data and two-year highs for the dollar.

Futures for the S&P 500 fought back to be almost flat half an hour following the release of the data: they had tipped a 0.4 per cent drop beforehand following a sell-off in Asian and European financial markets earlier on Friday. The yield on the policy-sensitive two-year US Treasury was up 2 basis points at 1.7419 per cent, about a basis point higher than before the release of the data.

On Thursday, the US equities benchmark swung in a 2 percentage point range – and Treasury yields staged among their biggest one-day drops of recent years – on Thursday after Donald Trump said the US would level a 10 per cent tariff on $300bn of additional Chinese goods, escalating the trade war between the world’s two biggest economies.

That followed Federal Reserve chairman Jay Powell catching investors off guard when he signalled during a press conference on Wednesday the interest rate cut delivered by the US central bank earlier that day was not the start of a lengthy policy easing cycle.

Figures on Thursday showing US manufacturing grew last month at its weakest pace in nearly three years initially helped the S&P 500 climb as much as 1.1 per cent that day as the market bet this would nudge the Fed to cut rates again soon, but follow some more upbeat data for June that included a rebound in durable goods orders and an acceleration in core inflation.

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