- Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC
While American employers added more than 200,000 new jobs for a sixth consecutive month in July, the longest period since 1997, the unemployment rate rose to 6.2% as more people joined the labour force. Nevertheless, an unexpected rise in the jobless rate may also point to some slack in the labour force, which could give the Fed room to keep interest rates low for some time. Nonfarm payrolls rose 209,000 last month after jumping by 298,000 in June, according to the Labor Department data. July marked the sixth straight month that employment has rose by more than 200,000 jobs, a streak last seen in 1997. The pace of hiring this year may help boost a self-reinforcing cycle of gains in spending and job opportunities that will spur the economy. Employment at private service providers rose 140,000 in July, the smallest gain in six months. Meanwhile construction companies added 22,000 workers and factory employment increased 28,000 last month, driven by a 14,600 gain in payrolls at auto plants, which was the biggest since April 2013.
While the labour market has improved, Fed policy makers said they will keep interest rates low until wages accelerate and more discouraged workers find jobs. Average hourly earnings, which are being closely watched as a potential signal of reduced slack that could urge the Fed to raise rates, rose only one cent. That left the annual rate of increase at 2.0%, still well below the levels that would make Fed officials concerned.
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