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 Nonfarm payrolls increased 209,000 last month after surging by
298,000 in June, the Labor Department said on Friday. Economists had
expected a 233,000 job gain.
Although job growth was below expectations, July marked the sixth
straight month employment expanded by more than 200,000, a signal of
strength last seen in 1997. In addition, data for May and June was
revised to show 15,000 more jobs created than previously reported.
The one tenth of a percentage point increase in the unemployment
rate to 6.2 percent came as more people entered the labor market, an
indication of confidence in job prospects.
"It's a goldilocks report for an economy that is steadily expanding
but not lifting off. It will reinforce for now the Federal Reserve's
commitment to a gradualist policy approach," said Mohamed El-Erian,
chief economic advisor at Allianz in Newport Beach, California.
U.S. Treasury debt prices rose as traders trimmed bets the Fed would
push rates up in the first half of next year, with the liftoff date
predicted by futures contracts moving to July from June. A Reuters
poll of top bond firms similarly found economists predicting a move
in the second half of 2015. [FED/R]
 U.S. stocks briefly gained as the prospect of continued low rates
soothed investors after a sharp sell-off on Thursday, but ended down
on persisting worries over Argentina's debt default. The dollar fell
against a basket of currencies.
The report showed average hourly earnings, which are being monitored
as an early warning sign of inflation pressures, rose only one cent.
That left the annual growth rate at 2.0 percent, well below levels
that would make the Fed nervous. Some other measures that have shown
wages rising more briskly have some economists worried the central
bank could fall behind the curve.
Fed policymakers on Wednesday cautioned that "significant" labor
market slack remained, signaling patience on the rate front. The
central bank has kept benchmark rates near zero since December 2008.
LITTLE INFLATION
A separate report from the Commerce Department showed inflation
easing in June. A price index for consumer spending, excluding food
and energy, edged up 0.1 percent after gaining 0.2 percent in May.
In the 12 months through June, the index was up just 1.5 percent,
still below the Fed's 2 percent target.
The same report showed income grew 0.4 percent.
"We are looking for stronger earnings gains as slack in the labor
market dissipates," said Scott Anderson, chief economist at Bank of
the West in San Francisco.
The cooling in hiring did little to change expectations for strong
economic growth in the third quarter. The Institute for Supply
Management reported that factory activity rose to its highest level
in more than three years in July, buttressing those expectations.
The rise was driven by a surge in orders and hiring.
Separately, automakers reported that July sales increased 9.1
percent from a year ago to a seasonally adjusted annualized rate of
16.48 million units. The pace, however, was down a bit from June's
16.80 million units.
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The economy grew at a 4.0 percent annual pace in the second quarter
after shrinking at a 2.1 percent rate in the first three months of
year. While restocking by businesses lifted the figure, growth is
seen remaining sturdy for the rest of 2014. A fifth report showed
consumer sentiment little changed in July as households kept an eye
on the steadily improving labor market. The unemployment rate has
declined from a peak of 10 percent in October 2009. While Americans
leaving the workforce has been a factor, job gains have also
contributed to the drop.
"The job market has moved from a 'fake recovery,' with unemployment
falling due to people abandoning the labor force, to a real recovery
of steady 200,000-plus payroll gains," said Ethan Harris, global
economist at Bank of America Merrill Lynch in New York.
The labor force participation rate, or the share of working-age
Americans who are employed or at least looking for a job, increased
to 62.9 percent in July after holding at 62.8 percent for three
consecutive months.
But other measures closely watched by Fed Chair Janet Yellen took a
step back.
A broad measure of joblessness that includes people who want to work
but have given up searching and those working part-time because they
cannot find full-time employment edged up to 12.2 percent. It had
touched its lowest level in more than 6-1/2 years in June.
At the same time, the ranks of the long-term unemployed swelled and
the length of time Americans are spending unemployed rose after
reaching its lowest point in more than five years in June. July's job gains were broad-based. Services industries accounted for
the bulk of the increase, adding 140,000 positions. That compared to
a 232,000 job rise in June.
 Manufacturing payrolls increased for the 12th month in a row, adding
28,000 jobs. Construction employment advanced for the seventh
consecutive month, with July payrolls rising 22,000. Government
employment increased by 11,000 jobs.
The length of the average workweek held steady at 34.5 hours.
(Reporting by Lucia Mutikani; Additional reporting by Jennifer Ablan
and Rodrigo Campos in New York; Editing by Andrea Ricci)
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