U.S. employers extended their hiring surge into July by adding a solid 209,000 jobs. It was the sixth straight month of job growth above 200,000, evidence that businesses are gradually shedding the caution that had marked the 5-year-old recovery.
The unemployment rate ticked up to 6.2 percent from 6.1 percent as more Americans started looking for work. Most didn’t find jobs, but the increase suggests that they’re more optimistic about their prospects. The jobless aren’t counted as unemployed unless they’re actively seeking work.
Average job gains over the past six months reached 244,000 in July, the best such average in eight years.
Still, the employment growth may raise alarms for investors, some of whom fear the Federal Reserve might increase short-term interest rates sooner than expected.
Such fears likely contributed to Thursday’s 317-point plunge in the Dow Jones industrial average — its worst day since February.
Friday’s report echoes other data that point to an economy picking up speed. Growth accelerated during the April-June quarter, the government said Wednesday, after contracting sharply in the first three months of the year. Last quarter’s bounce-back assuaged fears that growth was too weak to support this year’s rapid hiring.
And on Friday, the government said consumer spending and income picked up in June.
In addition to reporting July’s solid gain, the government on Friday revised up its estimate of the job increases in May and June by a combined 15,000.
Higher-paying jobs showed strong increases in July. Manufacturing added 28,000 jobs, the most in eight months. Construction added 22,000 and financial services 7,000, its fourth straight gain.
In the April-June quarter, the economy expanded at a seasonally adjusted 4 percent annual rate after a steep 2.1 percent contraction in the first quarter. Americans stepped up their spending, particularly on autos, furniture and other big-ticket items. Businesses also spent more on plants, office buildings and equipment.
Americans are also gradually gaining confidence in the economy, which means spending could accelerate in coming months. The Conference Board’s consumer confidence index jumped to its highest level in nearly seven years in July.
Yet the pickup in hiring has yet to translate into larger paychecks for most Americans, a key factor that has hobbled the recovery. Average hourly pay rose just 2 percent in July compared with 12 months earlier, just below inflation of 2.1 percent. In a healthy economy, wages before inflation would increase 3.5 percent to 4 percent annually.
Weak pay gains are restraining the housing market, usually a key driver of growth. A measure of signed contracts to buy homes slipped in June, the National Association of Realtors said this week. That suggests that home sales will decline in coming months.