Expected solid job gains seen as boost to
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[August 05, 2016]
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. employment
likely increased at a healthy clip in July, with wages picking up, which
should help to underpin consumer spending and boost the economy.
The Labor Department's closely-watched employment report on Friday will
probably show that nonfarm payrolls increased by 180,000 jobs last
month, according to a Reuters survey of economists. While that would be
a step down from June's 287,000 surge, July's expected gain would still
be above the average monthly advance of 171,500 jobs over the first half
of the year.
June's robust hiring, which followed a mere 11,000 gain in May, was
viewed as unsustainable given that the economic growth in the last three
quarters averaged a 1.0 percent annualized rate.
Should job growth meet expectations, it would reinforce the Federal
Reserve's confidence in a labor market that officials view as at or near
full employment, economists say. Fed Chair Janet Yellen has said the
economy needs to create just under 100,000 jobs a month to keep up with
"The Fed is likely to take encouragement from this jobs report as even a
180,000 print will still be consistent with further progress in
absorbing labor market slack," said Millan Mulraine, deputy chief
economist at TD Securities in New York.
"Nevertheless, it is unlikely to change the dial on their wait and see
policy stance," he said.
After a policy meeting last month, the Fed described the labor market as
having "strengthened" and that the job market measures pointed to some
"increase in labor utilization."
The U.S. central bank hiked interest rates in December for the first
time in nearly a decade, but has held them steady since amid concerns
over persistently low inflation. Most economists expect another rate
hike in December, though financial markets have almost priced out that
Pointing to labor market strength, the unemployment rate is forecast to
have dropped one-tenth of a percentage point to 4.8 percent. In
addition, average hourly earnings are expected to have increased 0.2
percent after edging up 0.1 percent in June. That would keep the
year-on-year gain at 2.6 percent.
There is, however, a chance earnings could surprise on the upside, given
favorable calendar effects.
"As the labor market continues to tighten, I think we will see wage
growth further accelerate," said Gus Faucher, deputy chief economist at
PNC Financial Services Group in Pittsburgh. "Consumers are driving
economic growth right now and one of the reasons is that wage growth has
gotten a bit stronger."
[to top of second column]
A job seeker (L) talks with a corporate recruiter (R) as he peruses
the man's resume at a Hire Our Heroes job fair targeting unemployed
military veterans and sponsored by the Cable Show, a cable
television industry trade show in Washington, June 11, 2013.
REUTERS/Jonathan Ernst/File Photo
A solid gain in payrolls would add to July auto sales in
underscoring the economy's sound fundamentals. Economic growth is
expected to accelerate to at least a 2.5 percent annualized rate in
the third quarter.
With the bulk of the labor market slack largely absorbed and the
economy's recovery from the 2007-09 recession showing signs of
aging, payroll gains will probably drift to average between 150,000
and 160,000 jobs per month in the second half of 2016, economists
"Don't expect job gains to match the previous few years increases
because the low number of unemployed and the declining supply of
those not in the market makes it hard to hire lots of people," said
Joel Naroff, chief economist at Naroff Economic Advisors in Holland,
The manufacturing sector is expected to have added jobs in July for
a second straight month. Payroll gains are also forecast for the
construction sector after three consecutive months of weakness.
While mining likely shed further jobs in July, the pace of layoffs
probably continued to abate amid increases in oil rigs.
Other details of the employment report are expected to show a steady
rise in entrants into the labor market. That would keep the labor
force participation rate, or the share of working-age Americans who
are employed or at least looking for a job, at 62.7 percent.
(Reporting by Lucia Mutikani; Editing by Tim Ahmann and Diane Craft)
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