The number of new jobs created by the US economy has slowed since last year, but companies are still hiring at a brisk clip that’s fast enough to nudge the unemployment lower and all but ensure an increase in interest rates this year.
That’s the latest read on the economy by those who are paid to figure out such things. Economists surveyed by MarketWatch forecast the US added a solid 160,000 new jobs in August. And the nation’s growth rate is expected to double to 2.2% in the third quarter that runs from July to September.
“Economic growth appears to be accelerating in the third quarter after an especially slow first half of the year,” noted economists at Nationwide, the large US insurer. Consumers have led the way with the biggest increase in spending in two years and home sales are also helping to fuel growth.
That’s not to say all is well. Energy producers and export-dependent manufacturers are struggling to expand while business investment and profits have gotten weaker.
The diverging fortunes of different portions of the economy, however, have only put a dent in growth. It hasn’t halted the seven-year-old expansion. Nor has job creation suffered all that much.
“While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market,” said Janet Yellen on Friday in a closely watched speech in Wyoming.
Indeed, hiring actually surged to an average of 274,000 new jobs a month in July and June after a paltry 24,000 gain in May. Companies aren’t making as much money as they were a few years ago, but a steady rise in consumer spending has created enough new demand to encourage firms to add workers.
“Consumers continue to put the economy on their backs,” said Ryan Sweet, director of real-time economics at Moody’s Analytics. “Household finances are in good shape and savings are relatively high.”
A similarly large increase in hiring in August probably isn’t in the cards, but with unemployment at 5% and the population growing more slowly, the economy doesn’t need to generate as many jobs. Economists calculate the US only needs to add about 100,000 new jobs a month to keep up with the increase in the working-age population.
A bigger problem for business is not a lack of demand for their products, it’s a shrinking pool of skilled workers available for hire, some economists say.
