Total non-farm payroll employment increased by 255,000 in July, far above what experts predicted.
The ADP employment report on Aug. 3 predicted June’s strong job growth would carry over into July, but still only predicted 179,000 jobs.
“Another solid month of job creation in July with 255,000 net new jobs,” the National Association of Realtors Chief Economist Lawrence Yun said. “From a year ago, the total now stands at 2.4 million new hires.”
“In recent prior years, wages had been stuck, but the latest trend is showing an upturn,” Yun said. “In July, wages grew at the fastest rate since 2009, rising 2.6%.”
“Given that homebuilders are experiencing labor shortage, a transfer of work into construction could help more home building, something that is critically needed to relieve the ongoing housing shortage,” Yun said.
Among the jobs added in July:
- Professional and business services added 70,000
- Health care employment increased by 43,000
- Financial activities rose by 18,000
- Leisure and hospitality added 45,000
- Government employment increased 38,000
- Mining trended down 6,000
Employment in other major industries, including construction, manufacturing, wholesale trade, retail trade, and information, showed little or no change over the month.
“Even though the jobs numbers have us breathing a sigh of relief, this report is not without its imperfections when it comes to housing,” Redfin Chief Economist Nela Richardson said. “Two months of strong job growth hides the letdown in construction jobs.”
“For the first time since August 2014, residential investment was a drag on U.S. GDP in the second quarter,” Richardson said. “The dearth of homes available for sale and lack of affordable new construction have challenged homebuyers in 2016.”
“A pickup in construction jobs is a missing piece of the housing puzzle that would help homebuyers, job seekers, and the economy at large,” Richardson concluded.
In the second quarter, real gross domestic product, the value of everything a nation produces, grew at a rate of 1.2% from last year, according to the estimate by the Bureau of Economic Analysis.
“The better than expected 255,000 increase in non-farm payrolls in July will renew speculation that the Fed might hike interest rates as soon as this September, but we still think Fed officials will want to see more evidence of a pick-up in GDP growth, which has been unusually muted for nearly a year now,” Capital Economics Chief Economist Paul Ashworth said.
Some economist, however, have a much more positive outlook over the report.
“It’s rare to have a jobs report with a strong headline, yet so few blemishes in the details, and we got one today,” Fannie Mae Chief Economist Doug Duncan said. “With upward revisions to prior months’ job gains, annual wage growth tying a seven-year best, an improved participation rate, and a longer workweek, the report gives support to those on the Fed hoping to increase rates this year, especially if the numbers are supported in future releases.”
“The report should help soothe concerns over the health of businesses, which have seen sustained declines in capital expenditures,” Duncan said. “Strengthening job and wage growth are positives for the demand side of the housing market, but weak residential construction hiring is worrisome from a supply perspective.”
“Together, these developments suggest continued strong home price appreciation,” he concluded.