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US economy adds 164,000 jobs in July

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US hiring continued at a steady pace in July and wages rose at a healthy clip, but a revision to the previous month’s job gains is likely to fuel debate over the outlook for interest rates.

Non-farm payrolls rose by a net 164,000 in July, the Bureau of Labor Statistics said on Friday, matching Wall Street’s median forecasts. That marked a slowdown from June, whose jobs growth was revised down from 224,000 to 193,000.

Professional and technical services, healthcare, social assistance and financial activities were the sectors that showed notable job gains. Manufacturing, one of the sectors most at risk from the US-China trade war, added 16,000 jobs last month.

The unemployment rate held steady at 3.7 per cent, near 50-year lows and in line with expectations.

There was more encouraging news for workers, with average earnings rising 0.3 per cent month-on-month in July, which topped expectations for a 0.2 per cent increase. The BLS also revised June’s monthly pace slightly higher to 0.3 per cent.

That translates to wage growth of 3.2 per cent year-on-year in July, the highest level since April and an acceleration from 3.1 per cent the previous month.

Traders were left to balance the rise in earnings with the overall picture on non-farm payrolls. As well as the downward adjustment to the June figures, the BLS also revised May’s number down by 10,000 to 62,000, meaning considerably softer hiring in the lead-up to summer than previously thought.

James Knightley, chief international economist at ING, said the July report showed US companies still have appetite to hire.

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“This is the longest US economic expansion since records began in 1854 with unemployment close to 50-year lows,” he said. “It is unsurprising that companies complain that difficulty finding suitable workers is the biggest constraint on hiring.”

The report once again showed the relative resilience of the domestic labour market. It comes at the end of a volatile week for investors who are juggling an escalation in the US-China trade war and confusion about the outlook for US interest rates with a mixed batch of economic data, while the dollar hovers at a two-year high.

The S&P 500 index of US equities was down 0.5 per cent in early trading on Friday after the jobs report, on top of Thursday’s 0.9 per cent decline. Asian and European financial markets also sold off on Friday.

The yield on the monetary policy-sensitive two-year US Treasury was up 2 basis points at 1.74 per cent, about a basis point higher than before the release of the data.

Another government report on Friday morning showed the US trade deficit narrowed 0.3 per cent in June to $55.2bn. While both imports and exports declined, suggesting that the trade war has been throttling trade flows, the latter fell by 2.1 per cent to a six-month low of $206.3bn.

Earlier this week, data showed US manufacturing grew last month at its weakest pace in nearly three years, although more upbeat recent reports included a rebound in durable goods orders in June and an acceleration in core inflation.

Federal Reserve chairman Jay Powell caught investors off guard on Wednesday when he signalled that the interest rate cut delivered by the US central bank that day — which the Fed said was partly a response to trade tensions — may not be the start of a lengthy policy easing cycle.

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Friday’s jobs report provided more confirmation “that the domestic economy is strong”, said Andrew Hollenhorst, chief US economist at Citi. “But when the Fed is focused on external downside risks more than the domestic data, it matters less for monetary policy.”

Additional reporting by Colby Smith in New York

Via Financial Times

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