Unemployment rate remains steady at 5.3% as US economy adds 215,000 jobs

As the US economy continues to add jobs, the Federal Reserve is expected to raise interest rates for the first time in almost a decade come September

The US economy added 215,000 jobs in July, while the unemployment rate remained steady at 5.3%, meeting expectations. The numbers released by the Department of Labor on Friday heighten expectations that the Federal Reserve will raise interest rates as soon as September.

Economists expected US employment to have grown by 225,000 jobs last month, and for the unemployment rate to hold at a seven-year low of 5.3%. So far this year, job gains have averaged 208,000 a month.

While the number of jobs added came in just shy of forecastsi “it’s still yet another solid employment report”, said Chris Williamson, chief economist at Markit. “With the Fed’s decision on the timing of the first rate rise being ‘data dependent’, today’s report does nothing to discourage the belief that a September hike is very much on the table, albeit by no means a done deal.”

Last week, applications for unemployment benefits increased by 3,000 to about 270,000. The four-week average dropped to 268,250, close to levels last seen in 2000. Such near-historic lows point to a healthy job market, according to economists.

“Initial claims for unemployment insurance have been below 300,000 for 22 straight weeks, the longest such stretch since 1973,” said Gus Faucher, senior economist at PNC Financial Services. “Claims are running at a pace consistent with monthly job growth of better than 200,000.”

Another increase of more than 200,000 jobs implies a continued downtrend in unemployment, according to Jim O’Sullivan, chief US economist at High Frequency Economics. Such a downtrend would reinforce the Fed’s assessment of the jobs market and recent employment gains as “solid” and get the unemployment rate within the 5% to 5.2% range that most Fed officials consider to be consistent with full employment.

The Fed is expected to raise interests rates in September, for the first time in nearly a decade. Testifying in front of Congress in July, Fed chair Janet Yellen said the US central bank had no judgement about “the appropriate date to raise the federal funds rate” but that it might be better to do so sooner than later.

“If we wait longer [to raise rates] it certainly could mean that when we begin to raise rates we might have to do so more rapidly,” she warned. “So an advantage to beginning a little bit earlier is that we might have a more gradual path of rate increases.”

Jerome Powell, a Federal Reserve governor, said earlier this week that nothing had been decided and that whether the Fed raises interests rates will depend on the data to be released before the September Fed meeting. Yet earlier in June, he indicated that he too would support gradual rate increases.

“My own forecast calls for liftoff in September and for an additional increase in December,” he said.

Probably the most assertive and outspoken in his support of raising the interest rates in September has been Dennis Lockhart, president of the Federal Reserve Bank of Atlanta.

“I think there is a high bar right now to not acting, speaking for myself,” he told the Wall Street Journal. “It will take a significant deterioration in the economic picture for me to be disinclined to move ahead.”

“Any Fed tightening cycle when it does occur is likely to be very modest. Low inflation and cooling growth will create powerful arguments against rate hikes,” said Williamson, the Markit economist, pointing out that wages have only gone up 2.1% over the last year.

According to the Economic Policy Institute, without the 3%-4% wage growth, average workers will not benefit from the economic growth.

While speaking before Congress, Yellen said that she was concerned with rising inequality and the impact it had on African Americans and their unemployment, but that there was little she could do about it.

“We don’t have the tools to be able to address the structure of unemployment across groups, but a stronger economy generally really does tend to be beneficial to all Americans and that’s what we are working towards,” she said.

The unemployment rate for black Americans dropped to 9.1% in July from 9.6% in June.


Jana Kasperkevic in New York

The GuardianTramp

Related Content

Article image
US economy's jobs slowdown raises doubts about interest rate rise
Labour department’s lower than expected September jobs data reveals 64,000 fewer jobs than forecast, making a rate rise by Federal Reserve less likely

Jana Kasperkevic in New York and Phillip Inman

02, Oct, 2015 @5:58 PM

Article image
US economy adds paltry 38,000 jobs in May for weakest growth since 2010
Total falls 122,000 short of economists’ expectations ahead of crucial Federal Reserve meeting, but unemployment rate dips to 4.7%

Jana Kasperkevic in New York

03, Jun, 2016 @12:40 PM

Article image
US economy adds 215,000 jobs as unemployment rate inches up to 5%
Economy avoids ‘March jinx’ by beating expectations as some analysts believe uptick in jobless rate signals return to job market by long-term unemployed

Jana Kasperkevic in New York

01, Apr, 2016 @12:37 PM

Article image
US economy adds 211,000 jobs as interest rate hike nears
Report slightly beats expectations and is the last before the Federal Reserve’s December meeting in which it is widely expected to raise interest rates

Jana Kasperkevic in New York

04, Dec, 2015 @1:33 PM

Article image
#BlackLivesMatter and so should the high unemployment rate
As the 2016 presidential campaign gets under way, black Americans are letting their elected officials know it’s no longer acceptable to brush the issue aside

Jana Kasperkevic in New York

06, Aug, 2015 @11:00 AM

Article image
US economy adds 280,000 jobs as slight rise in jobless rate signals optimism
Economists had predicted growth of 225,000 jobs as Federal Reserve officials feel the data is not strong enough to justify raising interest rates this month

Jana Kasperkevic in New York

05, Jun, 2015 @1:09 PM

Article image
US unemployment rate falls to 7.7% as economy adds 146,000 jobs in November

Jobless rate falls to lowest level since December 2008 but data shows sharp downward revisions to previous two months

Dominic Rushe in New York

07, Dec, 2012 @4:36 PM

Article image
US economy adds 173,000 jobs as unemployment rate drops to 5.1%
Jobs report falls short of expectations as numbers are likely to complicate matters for the Fed, which is expected to raise interest rates

Jana Kasperkevic in New York

04, Sep, 2015 @12:42 PM

Article image
Strong dollar and low oil price lead to disappointing US jobs figures
First rate rise by Fed not expected until later in year as non-farm payrolls report shows only 126,000 jobs added in March after year of 200,000-a-month rises

Katie Allen

03, Apr, 2015 @4:01 PM

Article image
US adds 192,000 jobs in March as unemployment rate remains at 6.7%
Lacklustre numbers shows US economy in the doldrums as number of jobs added falls below economists' predictions

Heidi Moore in New York

04, Apr, 2014 @1:50 PM