Strong U.S. Jobs Data Boosts Expectations of Acceleration in Economic Growth

The U.S. Non-Farm Payrolls report released at 1230 GMT showed U.S. employment increased more than expected in July. The headline number was strong, but what put the report over the top was an increase in Average Hourly Wages. The Unemployment Rate remained unchanged. The strength of the three components of the jobs report should boost expectations of an acceleration in economic growth and likely raise the chances of an interest rate hike from the Federal Reserve before the end of the year.

According to the Labor Department, U.S. Non-Farm Payrolls increased by 255,000 jobs in July. June’s figure was revised higher to 292,000. May payrolls were also revised higher to 24,000, up from 11,000.

The unemployment rate was flat at 4.9 percent as more people entered the labor market. The highlight of the report was the increase in Average Hourly Wages, which increased a healthy eight cents, or 0.3%.

The headline number beat the pre-report estimate of 180,000. Average Hourly Earnings were higher than the 0.2% estimate and the Unemployment Rate came in flat, but higher than the 4.8% estimate.

The growth in the labor force should reinforce the Fed’s confidence in the labor market that officials view as at or near full employment.

Breaking down the data further, the 0.3 percent increase in Average Hourly Earnings put it on pace for a 2.6 percent annual gain. This is higher than the current inflation rate.

Other details of the employment report showed a rise in the labor force. That raised the participation rate, or the share of working-age Americans who are employed or at least looking for a job, by one-tenth or a percentage point to 62.8.

In other news, U.S. Treasury yields rose, helping to make the U.S. Dollar a more attractive investment against the major currencies. The Greenback posted gains against the Euro, British Pound and Japanese Yen. The dollar-denominated gold market fell on the news and U.S. equity prices rallied. Overall, the financial markets had a textbook response to report.