The U.S. job market is chugging ahead, making the type of progress Federal Reserve policy makers want to see in order to raise interest rates as soon as September.
Employers added 215,000 jobs in July, the unemployment rate held at a seven-year low of 5.3 percent and workers put in longer hours, a Labor Department report showed Friday. Payroll gains in the previous two months were revised up.
The broad-based gain in hiring -- with builders to hospitals to restaurants adding staff -- signals employers are optimistic the U.S. will successfully navigate past a global growth slowdown. More jobs combined with a longer workweek are making up for still-slim wage increases, which may encourage consumers to boost spending and spur the economy.
“Job growth is rock solid,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who correctly forecast the increase in payrolls. “It’s more than sufficient to continue to chip away at the slack that’s left in the job market.”
Stocks fell, with the Dow Jones Industrial Average posting its longest slide since 2011, after the jobs data and amid declines in commodity producers. The Dow slipped 0.3 percent, falling for a seventh day and reaching a six-month low. The Standard & Poor’s 500 Index also declined 0.3 percent.
Retailers and business services led the industries adding to headcounts in July, followed by health care providers and restaurants. Manufacturing payrolls rose by the most in six months on gains among non-durable goods producers. Construction companies continued to add jobs, reflecting more hiring at residential contractors.
The rise in July payrolls followed a 231,000 advance, which was previously reported as a 223,000 increase. The median forecast in a Bloomberg survey of economists was for the creation of 225,000 jobs last month. Revisions to prior reports added a total of 14,000 jobs to overall payrolls in the previous two months.
Payroll gains averaged 235,000 over the last three months, the strongest since December through February. What’s more, the number of Americans finding full-time work rose, bringing the share of total employment to the highest level since November 2008.
The disappointing piece of the report rested once again with worker pay, which has continued to track in the same narrow range since the recovery began in mid-2009. Average hourly earnings climbed 2.1 percent from a year earlier, less than the median forecast of 2.3 percent.
Still, workers did put in longer hours. The average work week for all employees increased six minutes to 34.6 hours, matching a five-month stretch ended in February that was the longest since 2008.
“Changes in hours are a good leading indicator for employment growth and also address one of the greatest areas of slack in the economy, which is the unusually large pool of part-time workers,” Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, North Carolina, said in a note to clients.
The underemployment rate, which includes discouraged workers who are no longer looking for a job and the part-timers who’d rather be full-time, decreased to 10.4 percent in July, the lowest since June 2008, from 10.5 percent a month earlier.
Fed Chair Janet Yellen and her colleagues are weighing when to boost borrowing costs for the first time since 2006. The central bankers said in a statement last week that they needs to see “some further improvement in the labor market” to help justify a rate increase, in addition to being “reasonably confident” inflation will move back to its 2 percent goal in the medium term.
“The labor market is improving in fairly broad-based ways,” Charles Plosser, former president of the Federal Reserve Bank of Philadelphia, said in a Bloomberg interview at a gathering of economists and investors in Grand Lake Stream, Maine. “Inflation is a little low, but that’s OK too. It’ll come back.”
The jobs report is “more reassuring evidence that September is a real possibility at this point,” Plosser said.
Joseph LaVorgna, chief economist at Deutsche Bank Securities, said in an e-mail to clients that the jobs report showed “further improvement in the majority of labor underutilization measures that Fed Chair Yellen has repeatedly emphasized,” keeping policy makers on track to begin raising rates at their September meeting. The Fed has the opportunity to view one more employment report before then.
Traders are pricing in a 54 percent probability that the Fed raises rates at the September meeting, based on the assumption that the effective federal funds rate will average 0.375 percent after liftoff. That compares with a 50 percent September probability priced in on Thursday.
A 15,000 jump in factory payrolls was a pleasant surprise as the nation’s manufacturers have been struggling with a slowdown in the energy sector and weak overseas markets. The increase last month reflected more hiring at producers of nondurables, including food, plastics and paper.
Employment in professional and business services, including computer systems design, engineering and architecture, remained robust last month.
Brian Whitney, 22, started his new job in Seattle this week as a technology consultant after graduating in May from the University of Southern California. Whitney, who has a degree in jazz studies and a minor in Web technologies and applications, said the position seemed like the perfect fit with his interests.
“Getting the offer was not only a relief but also very humbling,” he said. “I know there are so many people out there right now that are still looking.”