U.S. employers hired at a healthy rate in July and the unemployment rate fell to match a 16-year-low, a show of lasting vitality for the labor market.
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Nonfarm payrolls rose by a seasonally adjusted 209,000 in July from the prior month, the Labor Department said Friday. The unemployment rate ticked down to 4.3% from 4.4% the prior month as more people joined the workforce. The July unemployment rate matched May's reading as the lowest mark since 2001.
Economists surveyed by The Wall Street Journal had expected 180,000 new jobs and a 4.3% unemployment rate last month.
June's payroll increase was revised up to 231,000 and May's gain down to 145,000, a net increase of 2,000.
The U.S. labor market has been a bright spot in a long recovery marked by slow growth. While economic growth has been stuck near a 2% annual rate-the weakest expansion since World War II-hiring has been consistent, with payrolls expanding for 82 straight months.
The period of monthly gains that began in 2010 is almost 3 years longer than the second-best streak from 1986 to 1990.
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Steady hiring this year suggests that the labor market has the capacity to expand further. However, it has yet to produce an acceleration in wages, though July data showed a slight firming.
Average hourly earnings for private-sector workers increased 9 cents last month to $26.36 an hour. It was the largest monthly increase since October. But from a year earlier, wages rose 2.5%, matching the modest pace recorded most of this year.
"I think we're getting to the point in many places...where they're saying, 'It's going to cost me too much money not to hire the extra labor. It's worth paying those higher wages'," Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a interview this week.
He said the unemployment only recently fell below a level that should spark stronger wage gains, which he expects are coming.
In response to broad improvements across the labor market, the Federal Reserve has raised short-term interest rates three times since December. Officials have penciled in one more increase for this year and appear likely to gradually reduce the Fed's $4.5 trillion asset portfolio, moves which could lead long-term rates to rise.
Several factors likely held back better wage growth in recent years, including weak worker productivity gains that challenge employers to justify raises and low inflation that makes it difficult for firms to pass along cost increases. But modest price increases means inflation-adjusted wages are rising at a slightly stronger rate than the 30-year average.
Health care, leisure and hospitality and business services led July's employment gain. Manufacturing jobs increased for the second straight month. Government employment increased slightly due to gains at the local level.
There are still some underlying signs of softness in the labor market.
The labor-force participation rate edged up to 62.9% in July from 62.8% the prior month, but remains near the lowest share of adults working or seeking work since the 1970s.
Labor force participation has been trending lower for nearly two decades, partly because the population is aging and more workers are retiring. It has mostly stabilized in the past year, suggesting some Americans who'd given up searching are being drawn back to the work force. If that's happening, the labor market might not be as tight as the unemployment rate suggests.
An alternative measure of unemployment and underemployment, which includes those who have stopped looking and those in part-time jobs who want full-time positions, was 8.6% in July, unchanged from the prior month. The rate, known as the U-6, fell as low as 7.9% in the prior economic expansion that ended in late 2007.
The Labor Department's employment report can be accessed at: http://www.bls.gov/news.release/empsit.htm
Write to Eric Morath at firstname.lastname@example.org and Josh Mitchell at email@example.com.
(END) Dow Jones Newswires
August 04, 2017 08:45 ET (12:45 GMT)