America’s economy is in good but not great shape this year.
The U.S. economy added 215,000 jobs in July. Economists surveyed by CNNMoney predicted the economy would add 216,000 jobs. Anything above 200,000 is considered very solid.
The unemployment rate stayed the same at 5.3%, which is its lowest point since April 2008, according to the Labor Department. That’s considered near full employment.
“Job growth is quite strong,” says Jim O’Sullivan, chief economist at High Frequency Economics, a research firm in New York. “This pace of employment growth is clearly strong enough to keep the unemployment rate trending down.”
Wage growth — the missing piece to America’s economic progress — remained sluggish in July. Average hourly earnings only rose 2.1% compared to the prior year. Wage growth is the reason many Americans haven’t felt the benefits of the economy’s recovery. The Federal Reserve wants to see annual wage growth closer to 3.5%.
“Wage growth numbers are still tame,” says O’Sullivan.
What will the Fed do? The jobs report is extra important now because the Fed is close to raising its key interest rate for the first time in over nine years. The Fed has said it will only hike rates if it believe the economy is healthy enough, especially for workers. A rate increase would be a good sign for the economy’s health, and how far it’s come since the recession ended.
Many experts believe this jobs report was strong enough to justify the Fed’s first rate hike taking place in September.
“It’s good enough to allow the Fed to begin tightening policy,” says Jeremy Lawson, senior economist at Standard Life Investments.
Although the Fed wants to see better wage growth before raising rates, wage growth isn’t a requirement. The Fed raised its key interest rate in June 2004 when average weekly earnings were 1.7% compared to the prior year, according to the Labor Department. Average weekly earnings in July were 2.4%.
The takeaway: Economic growth has been okay this year — solid but nothing to get excited about. Last year, the economy added 240,000 jobs a month on average between January and July. This year that figure is 178,000 — a sign that job growth in isn’t as stellar.
However, there were some encouraging employment signs in July. The number workers who have part-time jobs but want full-time jobs fell to 6.3 million workers. A drop in the number of these so-called involuntary part-time workers means more people are finding full-time (and better paying) jobs.
The black unemployment rate moved down too. It fell to 9.1%, its lowest mark since April 2008. As recently as May, the rate was over 10%. Blacks have suffered from the highest rates of unemployment. More job growth for blacks bodes well for the rest of the job market.