US employers add 209K jobs in July, labor department says

U.S. employers extended their solid hiring into July by adding 209,000 jobs, the Labor Department said Friday in its monthly report. It was the sixth straight month of job growth above 200,000 — evidence that businesses are gradually shedding the caution that had marked the five-year-old recovery.

While July's jobs gain was lower than in each of the previous three months, the job report pointed to an economy that has bounced back with force after a grim start to the year, and is expected to sustain its strength into 2015. 

The unemployment rate ticked up in July to 6.2 percent from 6.1 percent. The rise came as more people entered the labor market, a sign of confidence in employment prospects. 

Average job gains over the past six months reached 244,000 in July, the best such average in eight years.

"Job growth slowed in July after heated gains in the past three months," Sal Guatieri, senior economist at BMO Capital Markets, told The Associated Press. "But hiring trends remain solid, reflecting a strengthening economy."

However, the pickup in hiring has yet to translate into larger paychecks for most Americans, a key factor that has hobbled the recovery. 

In July, average hourly earnings ticked up just a penny to $24.45. That's only 2 percent higher than they were 12 months earlier, and slightly below current inflation of 2.1 percent. In a healthy economy, wages before inflation would rise 3.5 to 4 percent annually.

The proportion of working-age adults who either have a job or are looking for one rose slightly in July from a 35-year low to 62.9 percent. It was the first increase in four months.

Meanwhile, weak pay gains are restraining the housing market, usually a key driver of growth. A measure of signed contracts to buy homes slipped in June, the National Association of Realtors said this week, suggesting that home sales will decline in coming months.

The weak pay growth suggests that "the labor market still has far to go before it is fully healed," Michael Dolega, senior economist at TD Economics, wrote in a note to clients. "Lack of wage gains leaves the Fed with a strong case for keeping rates low for the next several quarters."

Still, Friday's report echoes other data that point to an improving economy. Growth accelerated during the April-to-June quarter, the government said Wednesday; it had contracted sharply in the first three months of the year. Last quarter's rebound assuaged fears that growth was too weak to support this year's rapid hiring.

And on Friday, the government said consumer spending and income had picked up in June. A separate report showed that manufacturing expanded in July at the fastest pace in more than three years as new orders surged, production rose and factories ramped up hiring.

Investors remain anxious about whether the broad economic gains will lead the Fed to raise its benchmark short-term rate sooner than expected. Such fears likely contributed to Thursday's 317-point plunge in the Dow Jones industrial average — its worst day since February.

In addition to reporting July's solid gain, the government on Friday revised up its estimate of the job increases in May and June by a combined 15,000.

Higher-paying jobs showed strong increases in July. Manufacturing added 28,000 jobs, the most in eight months. Construction added 22,000 and financial services 7,000, its fourth straight gain. 

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