WASHINGTON (Reuters) - U.S employment growth likely retained enough momentum in July to help buoy the economy for the rest of the year.
Nonfarm payrolls probably increased by 233,000 this month, according to a Reuters survey of economists. That would be a step down from June’s hefty increase of 288,000 jobs and the monthly average of 272,000 jobs gained in the second quarter.
It would, however, be the sixth straight month that employment has expanded by more than 200,000, a stretch last seen in 1997. The jobless rate is seen holding at a six year-low of 6.1 percent.
“It looks like employers are not shy about adding to head count. The recovery is on solid ground and we are expecting the data to show that in the month of July,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
Second-quarter gross domestic product data on Wednesday is expected to show the economy expanding at a 3.0 percent annual pace, rebounding from the first-quarter’s weather-related 2.9 percent slump.
That pace of growth is expected to be sustained for the remainder of this year, and economists point to the solid job gains as evidence for their optimism.
“Due to the strength in the labor market, we maintain that the weakness in economic growth in the first quarter is a one-off event and the trend in the labor market better represents the current direction of the economy,” said John Silvia, chief economist at Wells Fargo in Charlotte, North Carolina.
The Labor Department will release its monthly employment report, which is closely watched by financial markets around the globe, at 8:30 a.m. EDT (1230 GMT) on Friday.
The firming labor market - corroborated by steady declines in new weekly applications for unemployment benefits and independent surveys showing increased hiring - raises the risk of the Federal Reserve increasing interest rates sooner and a bit more aggressively than financial markets currently anticipate.
Fed Chair Janet Yellen warned of that possibility earlier this month.
Most economists look for the first increase in the second quarter of next year. [ECILT/US] The Fed has kept its benchmark lending rate near zero since December 2008.
The private sector is expected to account for the bulk of the employment gains in July. Government payrolls are expected to increase modestly after increasing by 26,000 in June.
Employment in the manufacturing sector is forecast increasing by 15,000 after adding 16,000 jobs in June. Economists, however, said factory job gains could surprise on the upside as data from automakers suggest strong production in July.
Construction employment could accelerate a bit, but weak housing starts during the month pose a risk to the downside.
Some moderation is expected in services industries employment growth, led by the retail sector.
Average hourly earnings, which are closely monitored as a signal of labor market tightness, are expected to have increased 0.2 percent. That would leave the annual rate of increase at 2.2 percent, still well below the levels that make Fed officials nervous.
But gains in recent months suggest wage growth has been quickening.
“The last couple of prints on average hourly earnings have almost rounded to a 0.3 percent increase, which would be consistent with a faster annual pace of growth closer to 3 percent than the 2 percent we have been seeing,” said Laura Rosner, an economist at BNP Paribas in New York.
The length of the average workweek is forecast steady at 34.5 hours, but could surprise on the upside because of strong auto production.
Reporting by Lucia Mutikani; Editing by Paul Simao