US hiring is chugging along at a ‘slow but still solid’ rate

The US economy added 164,000 jobs in July, in line with expectations and the rate of growth over the last quarter. That’s a healthy number, considering the economy has been expanding for more than a decade.

The unemployment rate remained at 3.7%, which marks the 17th straight month that it’s been at or below 4.0%.

The pace of hiring has slowed to an average of 140,000 new jobs per month over the past three months, down from a 187,000-per-month rate over the past year. The report matched forecasts exactly.

“After an acceleration in 2018, job growth in 2019 is somewhat slower but still solid,” Gus Faucher, chief economist for PNC Financial Services, wrote in a note to clients. “A tight labor market that is making it difficult to find workers; reduced fiscal stimulus, trade tensions, slower global growth, and business uncertainty are all weighing on the labor market.”

But workers also continue to jump into the job market, with 370,000 people entering the labor force in July. And people are finding jobs faster after losing one: The average duration of unemployment dropped to 19.6 weeks, which is the lowest it’s been in this economic cycle.

Meanwhile, the number of people working part time who would prefer full-time work declined by 363,000. The broadest measure of unemployment — which also takes into account people discouraged from looking for work — declined to 7.0%, the lowest point since December 2000.

“I do not think that anybody really anticipated that there were as many people on the sidelines willing to come into the labor force,” said Marvin Loh, a global macro strategist at the financial services firm State Street. “Decelerating to a 140,150 thousand jobs per month level is very consistent with where you’d expect us to be 10 years into an expansion. It’s fine. It’s absolutely fine.”

Average hourly earnings ticked up 3.2% from a year earlier, enough to make up for the rising cost of living, but is still anemic considering how tight labor markets have been for so long.

Employment gains were powered by the fast-growing professional and technical services industries, which together added 31,000 jobs, a third of which were in computer systems design. Health care grew by 30,000 jobs, bringing that sector’s gains to 405,000 over the year.

The goods-producing sector, however, has been sagging all year. The Institute for Supply Management’s manufacturing index, which measures optimism among manufacturing companies, declined to a three-year low in July as uncertainty around trade policy continued to make future planning difficult.

Manufacturing added only 16,000 jobs in July — not much for a sector with 12.9 million jobs overall — while the number of hours that factory workers work in a week declined to their lowest level since 2014. Mining and logging industries, which have been rocked by volatile oil prices, subtracted 5,000 jobs. Construction employment was also essentially flat, with heavy and civil engineering construction shrinking by 4,300 jobs.

Following the first interest rate cut in more than a decade this week, the decent jobs report dampened market hopes for another cut at the Federal Reserve’s next meeting in September. “It reinforces our sense that another move next month isn’t yet as sure a thing as the markets are now pricing in,” Andrew Hunter, senior US economist at Capital Economics, wrote in a note to clients.