NEW YORK — U.S. payroll employment rose strongly by 255,000 in July as the payroll employment gain built further on the robust 292,000 gain in June, RBC Economics reported.
The unemployment rate remained unchanged at 4.9 percent, with wages continuing to rise by 2.6 percent during the past 12 months.
The July payroll employment increase was much stronger than the 180,000 that had been expected, said Paul Ferley, assistant chief economist.
These expectations largely anticipated some payback from June’s outsized 292,000 increase that was revised slightly higher from the previously estimated 287,000, he explained. Employment gains during the last two months were up markedly from an average monthly increase of 151,000 during the first five months of 2016.
The overall increase reflected service-producing job growth remaining strong at 201,000, although this was down from the 254,000 surge reported in June. Goods-producing employment rose by a modest 16,000, although this was up from a 5,000 gain in June.
Government employment was up by a strong 38,000, which built further onto the 33,000 jump recorded in June.
“Today’s report not only indicated rising employment but also a lengthening workweek, which rose to 34.5 hours from 34.4 hours in June,” said Ferley. “As a result, the index of aggregate weekly hours jumped by 0.5 percent in the month.”
The level of this index in July was already up by an annualized 2.3 percent relative to the second quarter and points strengthening growth relative to the first half of 2016, when this measure was only up by 1.2 percent.
“Indications of a marked strengthening in growth in the index of aggregate weekly hours, which reflects the combined effect of both employment and hours worked, augur well for the pace of gross domestic product (GDP) activity to strengthen after a disappointing first half,” said Ferley.
“The Fed will likely take encouragement from this report, although any change to monetary policy is likely to await confirmation that this stronger growth is materializing on a sustained basis and that there is an attendant rise in inflation closer to its 2 percent objective,” he explained.
“Our forecast does not assume that the current range for fed funds of 0.25 percent to 0.50 percent will be raised until the second quarter of 2017.
Canadian employment report disappoints economists
Employment in Canada dropped by 31,200 in July while 12,800 left the labor force; the unemployment rate was up to 6.9 percent.
However, a total of 94,333,000 Americans were not in the labor force in July, according to CNS News, which is a slightly better showing than June’s 94,517,000. The labor force participation rate improved slightly, increasing a tenth of a point to 62.8 percent from June’s 62.7 percent. To read the CNS News report, click here.
Job losses totaled 31,200 in June, thereby defying expectations for a 10,000 increase, said Dawn Desjardins, RBC assistant chief economist. The details of the report were weak, with losses of full-time jobs and across the majority of industries.
The public sector bore the brunt of the decline while private companies hired 13,600 workers. Good producers shed 4,300 jobs, building on the large 46,000 cut in June. Service-sector firms also reduced employment in July by 27,000, thereby reversing more than half of the 46,000 workers hired in June.
However, 10 of 16 industry groups cut employment in July. The bright spots were in manufacturing (up 5,600) and health care (up 28,300).
The decline in employment was largely due to a 28,000 drop in hiring of youth, with other age cohorts seeing little change in July. The labor force contracted, and the participation rate edged downward to 65.4 percent. The pace of wage gains decelerated further to 1.8 percent, sharply below the 3.1 percent in January through April.
British Columbia was the only province to show an increase in employment and now sits with the country’s lowest unemployment rate at 5.6 percent, said Desjardins. Ontario saw large job losses, although the accompanying decline in the labor force saw the unemployment rate hold at a cycle low of 6.4 percent.
In Alberta, there were 1,400 jobs cut, and 17,600 people joined the labor force, thereby pushing the unemployment rate to another cycle high at 8.6 percent.
“Today’s weak employment data alongside another drop in export volumes in June that was also reported this morning calls into question just how strong the expected rebound in growth in the third quarter will be,” said Desjardins. “Part of the weakness in employment was due to job losses in Alberta where 48,400 positions were cut from April through July.
“Disappointingly, the rest of the country did not see significant gains, as employment increased by only 28,000,” she added. “The bright spot continues to be British Columbia where job creation totalled 32,700 during the four-month period and resulted in the unemployment falling close to its post-recession low.
“Also worrying is the slowing in wage growth, given that much of the economy’s positive momentum came from consumer spending,” she explained. “The Bank of Canada kept a cool head in its July forecast update, pointing to one-off factors as the cause for the weaker growth and anticipating a marked rebound in the third quarter of 206. Markets will be watching keenly to see if the Bank keeps this positive tone.”
SOURCE: RBC Economics press release