U.S. Data Release: Employment (July 2015)

Non-farm payrolls rose by 215k in July, modestly below expectations for a 225k gain. Private-sector hiring expanded by 210k, a hair below the consensus call of 212k. Positive net revisions of 14k to the previous months should revise away any disappointment in the topline number. June's revised job growth was 231k (previously reported at 223k) and May's was 260K (previously 254k). The unemployment rate remained steady at 5.3%. Household survey employment rose 101k, slightly ahead of labor force growth of 69k. The labor force participation rate also remained steady at a 38 year low of 62.6%

By industry, private goods-producing employment rose a robust 17K, as manufacturing saw gains of 15k and construction payrolls edged up 2k. Mining employment was unchanged after falling for seven consecutive months. Private services employment rose 193K, while government payrolls were up 5k, all at the state and local level.

Average hourly wages were up 0.2%, bringing the year-over-year rate to 2.1% (from 2.0%). Average weekly earnings rose a more robust 0.5%, as average weekly hours worked grew 0.3%. The U6 underemployment rate, including marginally attached workers and those working part-time for economic reasons edged down to 10.4% from 10.5% in June.

"There is little reason for disappointment with this report. Most importantly it easily meets the Fed's requirement for "some further improvement in the labor market." With job growth in July above its five year average (of 190k), and net revisions adding to the total, the case for a September rate hike just got stronger", says TD Economics.

 To date, the one fly in the ointment is the slow pace of wage growth. Average wage growth of 0.2% won't cause anyone to spill their coffee, but it signals continued improvement. The more consequential number is the growth in average weekly earnings, which showed clear signs of acceleration. With inflation hovering around 0.0% this implies a meaningful improvement in aggregate real income that gives confidence to our expectation for consumer spending to drive economic growth forward.

"The long run of above 200k in job growth must also be taken against a backdrop of gradually slowing trend job growth. As the recovery matures, expectations for job growth must be adjusted downward accordingly", notes TD Economics.