US economy creates more jobs than expected in July

Non-farm payrolls increased by 209,000 in the month, beating the Wall Street analysts' consensus of 183,000

Ben Chu
Economics Editor
Friday 04 August 2017 13:40
Comments
US job gains in July occurred in food services, including diners
US job gains in July occurred in food services, including diners

The US economy created more jobs than expected in July helping to send the unemployment rate lower once again, sharpening expectations of faster monetary tightening by the American central bank.

According to the US Bureau of Labour Statistics (BLS) non-farm payrolls increased by 209,000 in the month, beating the Wall Street analysts' consensus of 183,000.

The data lifted the value of the dollar index to 93.129, up 0.42 per cent.

Ten year US Treasury yields also jumped by around 2 basis points to 2.25 per cent.

"The strong rise in non-farm payrolls in July, together with the drop back in the unemployment rate to a joint 16-year low suggests the Fed will still need to raise rates again later this year, even if inflation remains subdued," said Michael Pearce of Capital Economics.

The BLS said job gains occurred in food services, bars, business services and health care.

Average wage growth in the month was 0.3 per cent, in line with analysts expectations, and keeping the annual growth rate at 2.5 per cent.

The unemployment rate fell to 4.3 per cent, down from 4.4 per cent in June and equalling the 16-year low seen in May.

President Donald Trump called the numbers "excellent" in a tweet.

The Federal Reserve raised rates by 0.25 per cent in June to 1 to 1.25 per cent and its forecasts indicated one more hike in 2017 and three more in 2018.

The central bank is also planning to start selling down its $4.5 trillion stockpile of financial assets, accumulated as past of its stimulus programme over the past decade, later this year.

However, some analysts stressed that US inflation remains subdued, with one key measure showing annual growth of just 1.5 per cent in June, well below the Fed's 2 per cent target and representing a reason why the Fed may delay hikes.

"This print does evidence how split the US economy is with low unemployment, good job creation, but longer-term inflation woes and mixed growth figures making [Fed chair] Janet Yellen’s job particularly difficult at present," said Alex Lydall of Foenix Partners.

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