You can’t get much better than this. The Labor Department announced that in July the economy created 209,000 jobs, of which 205,000 were in the private sector, beating economists’ expectations. The unemployment rate declined to 4.3 percent, and the labor force participation rate rose to 62.9 percent—low by historical standards, but an improvement over June. Look at it another way—349,000 people entered the civilian labor force, and all but 4,000 of them found employment, mostly in the service sector. Low-skill workers are increasingly finding jobs. Unemployment rates for those with a high school diploma and no college, and those with some college but not a BA, declined. Despite the entry of these low-skill workers to the labor market, hourly earnings rose by nine cents an hour.
This shows a tight labor market, and the Fed has no excuse not to raise rates by 25 basis points next month, as is widely predicted. The question is whether the demand for workers will encourage those who have left the labor force since the Great Recession to reenter.
MI Responds features real-time commentary from MI scholars on breaking news and developing issues.
______________________
Diana Furchtgott-Roth is a senior fellow and director of Economics21. She also served on the transition team for President Donald Trump. Follow her on Twitter here.