US job growth exceeds forecast as unemployment rate falls

NEW YORK (BLOOMBERG) – US employers added the most jobs in nearly a year and the unemployment rate declined faster than forecast, showing the labour market is making more robust gains toward a full recovery as the economy strengthens.

Payrolls climbed by 943,000 last month after an upwardly revised 938,000 increase in June, a Labour Department report showed Friday (Aug 6). The median estimate in a Bloomberg survey of economists called for a 870,000 gain. The unemployment rate dropped to 5.4 per cent.

Government payrolls added 240,000 jobs to the headline figure. Private payrolls posted a solid gain as well. The dollar extended gains against all of its Group-of-10 currency peers after the release, and 10-year Treasury yields advanced. Stock futures also rose.

A resurgence in economic activity has sparked a surge in labour demand – particularly in the leisure and hospitality industry – since the beginning of the year. At the same time, payrolls remain 5.7 million short of pre-pandemic levels and many employers have struggled to fill a record number of vacant positions.

The figures mark another step toward the Federal Reserve’s goal of “substantial” further progress in the labour market recovery. Fed officials including chair Jerome Powell and Governor Lael Brainard have indicated the labour-market recovery had some way to go before the central bank could begin tapering asset purchases.

Fed Governor Christopher Waller said this week that if the next two monthly employment reports show continued gains, he could back such a move.

The data offer validation for President Joe Biden’s efforts this year to approve almost US$2 trillion in pandemic relief and widely distribute vaccines, amid signs that employers were having difficulty finding workers.

At the same time, a stronger labour recovery could spur lawmakers to pare back Mr Biden’s long-term proposal for trillions of dollars toward child care, education and other social measures.

Overall job growth in July was bolstered by a 221,000 seasonally adjusted gain in local education payrolls. The government attempts to smooth out the school-related dismissals that occur during the summer months. Because of smaller staffing levels this spring, the adjustment resulted in a larger July gain.

Friday’s figures showed a 703,000 increase in private payrolls, which was led by leisure and hospitality, which jumped by 380,000.

The labour force participation rate – a measure of the share of Americans who are employed or looking for work – edged up to 61.7 per cent in July.

In an effort to encourage unemployed Americans to look for work, roughly half of US governors have ended federal unemployment benefit programs created during the pandemic before their official expiry in September.

Employers including Amazon.com and McDonald’s Corp, meanwhile, have been increasing wages and offering signing bonuses to lure workers. Average hourly earnings increased by 0.4 per cent in July for a second month, the report showed.