US jobs: another positive payrolls surprise

A strong employment report keeps the door open for an interest rate rise in December.

5 August 2016

Keith Wade

Keith Wade

Chief Economist & Strategist

Just as the doubts were creeping in over the strength of the US economy, we get another strong employment report. Non-farm payrolls1 rose 255,000 in July compared with expectations of a 180,000 gain. Net revisions were positive so last month’s increase was revised up by 5,000 to 297,000.

Strength was also seen in average hourly earnings (up 0.3% month-on-month, to 2.6% year-on-year) and average hours worked which came in at 34.5. Both these items were above expectations.

The only disappointment was on the unemployment rate, which remained at 4.9% against expectations of a decline to 4.8%, although this reflected an increase in the participation rate.

Economic activity picking up

Today’s figures suggest that US activity is picking up pace as companies hire and wages strengthen. The weak GDP growth recorded in the second quarter looks to have been unduly depressed by inventory cuts which will drop out in the current quarter.

The pace of jobs growth combined with hours worked points to an economy accelerating in the current quarter.

The figures are surprising against a backdrop where company earnings are declining even outside the energy sector, but suggest that companies are seeing health in underlying demand. This would only be confirmed though if business capital spending also begins to revive after a soft second quarter.

December rate rise on the cards

As far as the Federal Reserve is concerned, this keeps the door open to a rate rise in December. Political risk will keep the central bank on the side lines before then.


1. Non-farm payrolls are a means of measuring employment in the US and represent the total number of people employed, excluding farm workers, private household employees and those employed by non-profit organisations.

Important Information: The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.