WASHINGTON – The jobs report for July that the government will release Friday is expected to show another month of solid gains, matching the steady hiring that has propelled the U.S. economic expansion.
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The report will also provide a key piece of evidence for the Federal Reserve to weigh in deciding whether the U.S. economy is ready for it to raise interest rates from record lows as soon as September.
Economists have forecast that employers added 225,000 jobs in July and that the unemployment rate remained at a seven-year low of 5.3 percent, according to a survey by FactSet. The job growth would roughly match June's 223,000 gain and the healthy monthly average of 244,583 over the past year.
The government will issue the July jobs report at 8:30 a.m. Eastern time.
Another hiring gain above 200,000 would likely nudge the Fed closer to its first rate hike in nearly a decade. The Fed has held its key short-term rate near zero since late 2008, a policy introduced after the financial crisis to try to energize the economy through stronger borrowing, investing and spending. Now, more than a half-dozen years into the recovery, Fed Chair Janet Yellen has suggested that the economy not only can tolerate but needs higher rates.
"A job growth number around consensus," said Scott Anderson, chief economist at the Bank of the West, should keep Fed officials "on track toward a September liftoff date."
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On the other hand, a weaker job gain of, say, around 125,000 could persuade the Fed to put off a rate increase until perhaps December, Anderson said.
Even as the Fed has nearly concluded that the economy is strong enough to withstand higher borrowing rates, many Americans remain anxious about a recovery defined by modest economic growth and meager pay raises.
The misgivings about the economy were on display Thursday night at the first Republican presidential debate, where 10 candidates in Cleveland discussed the challenges of an unwieldy tax code and the pressures on American workers resulting from immigration and global trade.
The economy grew at an anemic 1.5 percent annual rate in the first half of 2015 — nearly half a percentage point weaker than the average of the past three years.
On the positive side, employers have added 2.9 million jobs in the past 12 months. And companies are laying off fewer and fewer workers: The monthly average of people seeking unemployment benefits remains nears a 15-year low, the government said Thursday. But average hourly wage growth has barely exceeded low inflation of around 2 percent.
The pace of hiring has managed to help revive housing and auto sales, according to industry reports. Still, the absence of significant pay raises has limited the consumer spending that accounts for a majority of economic activity.
Lower gasoline and oil prices have yet to provide the kind of boost they have in the past. Energy companies responded to oil of less than $50 a barrel by cutting orders for equipment and pipelines, causing many manufacturers to slow their hiring. And instead of spending their savings at the gasoline pump, consumers have mostly pocketed the additional cash.
A strong dollar has also weighed on economic growth. The dollar has risen about 14 percent in value against overseas currencies in the past year, thereby cutting into exports by making U.S. goods costlier overseas.
Falling unemployment usually reduces the number of people available to hire, which then forces employers to boost wages. But many frustrated job seekers have stopped looking for work, perhaps only temporarily. This has made it hard to assess just how healthy the job market is and when pay might rise at a faster rate.
Roughly 8.3 million Americans are still looking for jobs. An additional 14.4 million people have left the job market — either abandoning their job searches or choosing to retire — since the recession officially began in late 2007. The result is that the share of adults working has fallen to 59 percent from nearly 63 percent eight years ago.
Companies often raise pay when their employees become more productive for each hour worked. But productivity fell at a 3.1 percent annual rate in the first three months of 2015.