The job market continues to be a pillar of strength for the U.S. economy.
Nonfarm payrolls rose 164,000 in July, in line with consensus estimates for a 165,000 gain, according to the jobs report released August 2. As shown in the LPL Chart of the Day, Solid Jobs Growth in July, job creation has slowed slightly this year amid the aging economic expansion, but not to levels that concern us. The 12-month average payrolls gain through July was 187,000, still an above-average pace for the expansion.
Strength in the job market is especially important these days as U.S. consumers increasingly bear the weight of economic growth. Consumer activity added 2.9 percentage points to second quarter gross domestic product (GDP), carrying GDP growth to 2.1%.
Initial jobless claims, a leading economic indicator, have also pointed to firm labor-market conditions. The four-week average for unemployment claims fell to the fifth-lowest level of the expansion through July 26.
“We’ve been encouraged by the labor market’s resiliency amid recent global uncertainty,” said LPL Research Chief Investment Strategist John Lynch. “A solid labor market should continue to bolster consumer confidence and buoy economic activity.”
Average hourly earnings grew 3.2% year over year in July, a faster pace than June’s growth and at a healthy clip for the U.S. consumer. Wages constitute about 70% of business costs, so we’re hoping meaningful pay increases will eventually help lift consumer inflation, countering weakness in global demand. The unemployment rate climbed to 3.7%, still near a cycle low.
Please see the Midyear Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets for additional description and disclosure.
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