The U.S. economy added 157,000 non-farm jobs in July, pushing the unemployment rate down to 3.9%, the U.S. Bureau of Labor Statistics reports.
Economists had forecast an increase of 193,000 jobs, on net, however, it should be noted that the BLS upwardly revised its job figures for June.
Sectors showing the strongest job growth included professional/business services, manufacturing and health care/social assistance.
In June, the unemployment rate was 4.0%.
According to the BLS, the number of unemployed decreased by 284,000 to 6.3 million.
The number of long-term unemployed (those jobless for 27 weeks or more) was essentially
unchanged at 1.4 million. They accounted for 22.7% of the unemployed in July.
The labor force participation rate, at 62.9%, was flat compared with June.
The employment-population ratio, at 60.5%, was also flat compared with June but was up 0.3% compared with a year earlier.
Wages increased but continue to be sluggish. According to the BLS, non-farm wages rose seven cents to a national average of $27.05.
Over the past year, average hourly earnings have increased by 71 cents, or 2.7%.
Average hourly earnings of private-sector production and nonsupervisory employees increased by three cents to $22.65.
So what does this improvement in the jobs market mean for the U.S. housing market, which has been seeing home prices hit record highs, as inventory constraints persist?
According to Mark Fleming, chief economist for First American, “Home buyers should feel a bit more confident today after the BLS’ employment situation report for July stated that the unemployment rate edged down to 3.9 percent, and hourly wages continue to increase.”
“House price appreciation has exceeded wage growth for six years, so any signal that wage growth may be closing the gap is good news for the housing market,” Fleming says.
“Since the job market has been so strong for so long, many believe the low unemployment should lead to higher wages, but many experts follow the wrong data to gauge if wages will grow,” Fleming says. “A stronger indicator of likely wage growth is the prime-age labor force participation rate. As this participation rate rises, competition among employers for workers increases, leading to higher wages. The current prime-age labor force participation rate, our ‘new Phillips curve,’ indicates production and non-supervisory wage growth should be 2.6 percent. This is much closer to today’s reported growth rate of 2.7 percent, when compared with the traditional Phillips curve model projection of 4.0 percent.”
Fleming points out that, despite the recent increase in wages, the pace at which hourly earnings are rising is nothing compared with the pre-recession years.
But the pace at which the U.S. economy is adding jobs is impressive.
“Total non-farm payroll jobs have now increased every month since October 2010,” Fleming says. “Since that date, the U.S. economy has added more than 18.4 million jobs.”
Notably, 19,000 new construction jobs were added to the economy in July (308,000 over the past year), hopefully helping to boost home construction and alleviate an ongoing inventory shortage that is inflating home prices.
