Job growth waxes strong in July

August 07, 2017

Keywords: Asset Management

The nation's economy received a propitious jolt in July, as employers increased their pace of hiring and more previously out-of-work Americans re-entered the labor force, newly released government numbers confirm.

Roughly 209,000 jobs opened up for Americans in the first full month of summer, according to the U.S. Department of Labor, pushing the unemployment rate to 4.3 percent - a low last witnessed in 2001. That's a slight decrease from June when an upwardly revised 231,000 jobs were added, but at the same time was more than economists had anticipated. According to The Wall Street Journal, the private sector has seen an uptick in jobs for 82 months in a row now, the second-longest run in hiring activity on record.

Brian Schaitkin, senior economist for The Conference Board, noted that far fewer Americans are seated on the jobless sidelines today than this time last year.

"The good news on employment is consistent with strengthening economic growth, including from investment, entering the second half of 2017," Schaitkin said in a press release. "More jobs and more investment are both signs that stronger global economic conditions may be lifting the ongoing expansion into a higher gear."

Full-time employment up, part-time down
Not only are more people gainfully employed, but many are working on a full-time basis, as evidenced by the rising Gallup's Good Jobs rate. The GGJ reached 46.3 percent in June, the highest number so far this year. Part-time employment fell by 44,000 in July, according to the Labor Department's estimates.

In addition to more Americans getting more hours on the job, they're also receiving a greater amount of earnings. Average hourly wages rose by around 10 cents in July, the Labor Department reported, a 0.3 percent uptick from June and 2.5 percent higher on a year-over-year basis. It's the fourth month in a row wages have risen by 2.5 percent or more, according to The New York Times.

How will Fed respond in September?
While any increase in pay is positive, earnings growth in July wasn't as high as economists' anticipated, Schaitkin noted, similar to the track record sluggish inflation has maintained in 2017 thus far. The Federal Reserve will surely have something to say about this at its next Federal Open Market Committee Meeting, which is slated for late September.

"Slower than expected wage and inflation growth relative to labor market conditions will likely cause the Federal Reserve to raise rates only once more this year," Schaitkin predicted. "A stronger economy could lead to a reconsideration of this policy change if it is combined with signals in the upcoming months that prices and wages are starting to rise faster."

The July jobs report was well received on Wall Street, as the Dow Jones industrial Average stretched its all-time high closing streak to eight days in a row. On Aug. 4, the DJIA jumped 66 points to 22,092, a fitting capstone on the record week that was. On 34 separate occasions since November, the Dow has hit an unprecedented peak.

Investors look to economic indicators like the monthly jobs report to get an assessment of where conditions stand for the public and how employment conditions might affect stock market participation. At Miles Capital, we use the same observational strategies but at a more granular level, providing portfolio recommendations to our clients based on decades of experience in asset management and scenario analysis.

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