July Job Numbers Keep Fed Rate Hike on Track

Wages remain soft, but labor report in line with central bank’s desire for ‘some’ improvement

Friday’s jobs numbers were in line with the Federal Reserve’s narrative for how the economy is developing—solid job growth and diminished slack in labor markets but no sign of wage or inflation pressure. This keeps the central bank on track to raise short-term interest rates this year, possibly in September, as some officials have recently signaled.

In speeches and official statements, Fed officials have described hiring as solid and have said the unemployment rate is evidence that slack in the labor market has declined and will eventually lead to an acceleration in wage and price gains.

The employment report released Friday, which was in line with market expectations and with the trend of recent months, likely won’t change those assessments.

The gain of 215,000 jobs in July was close to average monthly payroll employment growth so far this year. Average hourly earnings of workers, up 2.1% from a year earlier, show no sign of wage acceleration.

The jobless rate at 5.3% in July was where Fed officials forecast it will be by year-end and is down from 6.2% a year ago. A broader measure of unemployment, which includes discouraged workers and people working part-time jobs who want full-time jobs, fell further to 10.4% from 10.5% in June and is down nearly two percentage points from a year earlier.

The Fed has been sending signals rates might go up in September. In an interview with The Wall Street Journal this past week, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said he would be inclined to raise short-term rates in September as long as he didn’t see convincing new evidence that the economy was off track.

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