WASHINGTON — With a robust economy at their backs, optimistic employers likely added jobs at a solid pace in July.
Economists forecast that employers added 191,000 jobs last month, down from 213,000 in June but easily enough to lower the unemployment rate over time. The jobless rate is projected to decline to 3.9 per cent, near an 18-year low, from four per cent.
Consumers are spending freely and businesses are stepping up their investment in buildings and equipment, boosting growth even as the economic expansion enters its 10th year. That’s raising demand for workers in industries ranging from manufacturing to construction to health care.
The economy expanded at a 4.1 per cent annual rate in the April-June quarter, the strongest showing in nearly four years. Oil and gas companies were a big driver: They nearly doubled their investment in new drilling rigs and other structures, adding as much as half a percentage point to growth. The new spending follows a 60 per cent jump in oil prices in the past year.
Many companies have complained about the tariffs imposed by the Trump administration and the retaliation from overseas that they sparked. But so far, the trade fights haven’t impacted hiring. Trump slapped tariffs on steel and aluminum, as well as on $34 billion of Chinese imports. The European Union, Mexico, Canada and China have all responded with retaliatory duties.
Mark Zandi, chief economist at Moody’s Analytics, said data from payroll processor ADP showed that very large multinational companies actually cut jobs in July. That may reflect tariff concerns, he said, though it could also be a blip.
Moody’s helps compile ADP’s monthly jobs report, which was released recently and showed companies hired 219,000 new workers last month.
Typically, when the unemployment rate falls as low as it is now, businesses raise wages more rapidly to attract and keep workers. Average hourly pay has been rising, though very slowly. It increased 2.7 per cent in June from a year earlier, the same annual pace as the previous month.
Yet that is below the 3.5 per cent to four per cent growth that occurred during previous periods when the jobless rate has been this low.
And inflation has picked up recently, reaching 2.9 per cent in June from a year earlier. That means that adjusted for rising prices, average hourly pay has declined a bit this year.
The economy is projected to grow at about a three per cent pace for the rest of the year, which would likely mean that growth for all of 2018 would top three per cent for the first time since 2005.
Strong demand from consumers and businesses sharply reduced the stockpiles of goods held on many store shelves and warehouses. Rebuilding those inventories will require additional factory output, potentially lifting growth in the third and fourth quarters.
One weak spot for economy, however, is the housing market. Sales of existing homes have fallen for three straight months and are now below a recent peak reached last November. Sales of new homes fell sharply in June.
With the economy healthy, more Americans want to buy homes, but there is a paucity of houses for sale. That has driven up home prices. Mortgage rates have also increased in the past year, lifting monthly payments and making many homes even less affordable.