Payrolls in U.S. increased 215,000 in July in broad-based gain

WASHINGTON – Employers added 215,000 jobs in July and the unemployment rate held at a seven-year low of 5.3 percent, signs of further progress in the U.S. labor market that’s keeping the Federal Reserve on the path toward raising interest rates as soon as next month.

The gain in payrolls last month followed a 231,000 advance in June that was bigger than previously estimated, a Labor Department report showed Friday in Washington. While the data also showed a pickup in hours worked, average hourly earnings climbed a less-than-forecast 2.1 percent from a year earlier, indicating little momentum in wage growth.

The persistent pace of hiring this year indicates companies are sanguine about prospects for demand in the face of a tempered global growth outlook. Better job security that leads to bigger wage gains could encourage consumers to spend more freely and provide more momentum for the economy.

“The Fed is close to tightening – it doesn’t need to see a lot more improvement, just a little more,” Dana Saporta, an economist at Credit Suisse Securities USA LLC in New York, said before the report. “Data that shows continued diminishing of slack in the labor market is sufficient” for policy makers to raise interest rates this year.

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Retail led the industries adding to headcounts in July, followed by health care and leisure and hospitality. Manufacturing payrolls rose by the most in six months on gains among non-durable goods producers. More jobs were also added in construction.

Economists’ projections

The median forecast in a Bloomberg survey called for a 225,000 advance. Estimates of 96 economists ranged from gains of 140,000 to 310,000 after a previously reported 223,000 June increase. Revisions to prior reports added a total of 14,000 jobs to overall payrolls in the previous two months.

Payroll gains averaged 235,000 over the last three months, the strongest since December through February.

Employee pay continued to track in the narrow range since the recovery began in mid-2009 showed a long-awaited pickup. Compared with a month earlier, hourly pay rose 0.2 percent to $24.99.

The average work week for all employees increased 6 minutes to 34.6 hours. A longer workweek often amounts to greater take- home pay for many employees.

Participation rate

The labor force participation rate, which indicates the share of working-age people who are employed or looking for work, held at 62.6 percent.

Factories boosted payrolls by 15,000, the most since January. The gains were led by more hiring in the non-durables industries, including food, plastics and paper.

Retailers added almost 36,000 workers and employment in the health care and leisure industries each climbed by about 30,000 in July.

Fed Chair Janet Yellen and her colleagues will use Friday’s data to help decide the best time to raise the benchmark interest rate from near zero, where it’s been since 2008. The central bank said in a statement last week it needs to see “some further improvement in the labor market” to help justify a rate increase, in addition to being “reasonably confident” inflation will move back to its 2 percent goal in the medium term.

Federal Reserve

The majority of economists surveyed last month by Bloomberg favored a September lift-off.

Economic data leading up to Friday’s report help explain why companies are continuing to add workers. Service industries, which make up almost 90 percent of the economy, expanded at the fastest pace in a decade, the Institute for Supply Management said Wednesday. The broad-based pickup was accompanied by a flurry of orders, prodding more companies to beef up staff levels.

At the same time, jobless claims are hovering near the lowest level in four decades, as becomes harder for employers to replace those let go.

The wage data, however, have been more mixed. Wages and salaries climbed in the second quarter at the slowest pace on record, the Labor Department said a week ago. The 0.2 percent advance was the smallest in data going back to 1982 and followed a 0.7 percent increase in the first quarter.

While Yellen has said that wages alone won’t determine policy, the choppy data add that much more importance to any remaining data leading up to the Fed’s September meeting.

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