US: July NFP consistent with economic growth - Wells Fargo

According to analysts from Wells Fargo, explained that July jobs numbers showed solid gains and a steady rise in wages indicating ongoing economic growth and consumer spending. They warn that beyond the cycle, structural unemployment issues remain.

Key Quotes: 

“Nonfarm payrolls rose a solid 209,000 in July, with the three month average at 195,000 jobs. Job gains are consistent with 2 percent plus economic growth, steady consumer spending and Fed policy as currently projected for a December rate hike.”

“Average hourly earnings rose 0.3 percent in July, an increase from the 0.2 percent pace the previous month. The year-ago pace of wage growth remained at 2.5 percent, the fourth consecutive month at this rate. While job growth remains strong, earnings continue to struggle to break out of this mid-two percent pace. The softer inflation readings and weak productivity numbers have limited the gains in nominal wage growth. On balance, average hourly and weekly earnings continue to improve and, along with more jobs, support the case for household income gains.”

“Over the longer run, wages reflect the economic fundamentals of the labor market, and those fundamentals include productivity and inflation. During the current cycle, low productivity has been a theme that has helped explain lackluster wage growth. Moreover, inflation has been persistently below the FOMC’s target of two percent. With both productivity growth and inflation continuing to prove sluggish, it is not altogether surprising that wage growth has disappointed given the performance of the fundamentals.”

“Labor force growth has picked up over the last year and is a healthy sign for continued economic growth with limits on the rise in average hourly earnings. Yet, the current pace of labor force growth is not enough, without additional productivity gains, to kick up economic growth into the 3 percent range.”