Wages Rise In July As Employers Add 255,000 More Workers

Aug 5, 2016

Whatever caused May’s payrolls to grow hardly at all now looks like a bad blip after the Labor Department’s report this morning showing hiring surged in July, adding 255,000 new nonfarm jobs.

The Labor Department’s monthly jobs report blew through the consensus forecasts of labor economists which predicted July saw about 180,000 new jobs. In addition, the department’s Bureau of Labor Statistics also adjusted the jobs numbers for May and June, adding 13,000 to May’s anemic 11,000 count and upping June from 287,000 to 292,000. The unemployment rate was unchanged at 4.9%.

Before the data was released, Michael Gapen, Barclays’ chief US economist told The New York Times, “Another solid gain in July would suggest that May’s numbers were an aberration.” This will be a validator.”

Private sector jobs growth was lead by the healthcare and hospitality sectors, which saw increases of 43,200 and 45,000 jobs respectively. Healthcare in particular has been adding jobs at a rapid pace for several years. In July, ambulatory services, including medical offices and clinics, added 18,900 jobs while hospitals accounted for 17,100.

Bars and restaurants grew payrolls by 21,200 new workers, while entertainment venues, spectator sports and the arts hired another 17,500.

Hospitality sector jobs, especially those in food and drink establishments, tend to be among the lowest paid, which has been one of the criticisms of the post-recession economic recovery. Nationally, wage growth has averaged about 2% annually since 2010, even as employers lamented the difficulty in hiring.

The latest report, however, suggests that the long-predicted wage growth may beginning to take hold.  In July, average hourly earnings for all employees on private nonfarm payrolls increased by 8 cents to $25.69. Over the year, average hourly earnings have risen by 2.6%, more than double the 1.1% rise in the consumer price index.. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $21.59 in July.

The robust hiring, coupled with wage growth, continues to lure some sidelined workers back into the workforce. In July, the labor force participation rate inched up another tenth of a percent to 62.8%. Even so, the rate is near the lowest in 40 years.

There was little change in the number of unemployed workers, which the BLS said has hovered around 7.8 million since last August.  Another 5.9 million are working at part-time jobs because their hours had been cut or they were unable to find a full-time job.

Looking ahead, SHRM predicts a mixed hiring outlook for August, with manufacturing practically flat while fewer service-sector companies will add workers compared to August of 2015. Recruiting was less difficult in July, but not by much, compared to the year before.

SHRM said its “findings show that many HR professionals are still having challenges with talent management and recruitment. More than two-thirds of HR professionals (68 percent) reported challenging recruiting conditions in the current talent market.”

While August may be a bit of a breather, The Conference Board’s Help Wanted OnLine count of posted job openings suggests the lull will be short. For only the second month since November, the number of posted openings grew. July saw 157,000 more online jobs posted than in June.