Jobs report – this is what economists will be watching
Fox Business Outlook: In a sign the strong labor market is boosting wages as employers compete for personnel, new data shows U.S. workers received their biggest pay increase in nearly a decade.
The U.S. government will release its report on the July jobs market on Friday, and it is expected that, once again, American employers would have added a large number of jobs.
Analysts polled by Thomson Reuters are expecting 190,000 jobs were created last month and there was an increase of 0.2% in average hourly earnings.
However, the number of jobs created isn’t likely to garner the most attention.
The jobs market has been healthy for months, with employers voicing concerns about the difficulty of finding workers.
They have even complained that the worker shortage could limit the growth of their business. When the jobs data is released, wage growth will be a number that economists will pay close attention to. Wage growth has been relatively tepid, and this has perplexed economists. If the competition for workers is so tight, shouldn’t companies find themselves having to pay more to recruit and maintain talent?
While many feel that the wage growth number should be higher, too big of a number could be a problem as it could signal an overheating economy and prompt a more aggressive Fed. According to Peter Donisanu, an investment strategy analyst at Wells Fargo’s Investment Institute, a February pickup in market volatility was attributed to a higher wage growth figure than what markets were expecting for the month of January, which prompted some market participants to anticipate a more aggressive Fed.
June’s jobs report was seen as a “Goldilocks” reading on the U.S. economy, with the data reflecting continued strength in the U.S. economy, but no overheating.
Wells Fargo believes this Friday’s report will reflect continued yearly gains in wage growth, but it isn’t likely to prompt concerns about overheating inflation. It also believes that it is possible that there could be a rise in the unemployment rate in the July report accompanied by higher labor force participation.
“This would be positive and reflective of robust growth in the U.S. economy,” Donisanu says in the published research notes.