Hiring Remains Resilient Despite International Headwinds

The Fed moved another step closer to a September rate lift-off as the economy added more than 200,000 jobs in July. Few major economic data releases remain between now and the next meeting of the FOMC in mid September. In addition to prodding the Fed into tightening monetary policy, job growth last month is indicative of steadfast resilience of the U.S. economy despite international pressures. July was peppered with economic headwinds, including Greece’s default and turmoil in the Chinese equity markets. Nonetheless, local companies continue to add workers, keeping the economy moving forward.

Employers added 215,000 jobs in July, a healthy, albeit unimpressive pace. The private sector contributed 210,000 positions and the public sector expanded by 5,000 workers. Professional and business services added 40,000 jobs last month; the largest gain among the major employment sectors. Payrolls in the retail trade sector widened by 35,900 employees, a welcome sign after retail sales have disappointed in recent months. The other major contributor to employment rosters was healthcare firms, which hired 30,100 workers to keep up with rising demand.

July Employment

Oil prices have fallen approximately $10 per barrel since the announcement of an international deal with Iran. Per-barrel prices are currently near $45, well below the threshold for many smaller operators to remain profitable. Payrolls in the mining and logging sector have already declined by 77,000 workers so far this year; though the pace of losses fell dramatically during the past two months. Pressure on oil prices will remain in place for the next several months, hampering job growth in oil-dependent areas of the country.

The impact of July’s job numbers on the single-family rental market is largely centered in the pending rise in the fed funds rate. While the headline date remains in some doubt, the markets have been pricing in the impending rise in interest rates for a significant period. As a result, mortgage interest rates are unlikely to rise in-step with the fed funds rate. In fact, the average 30-year rate from the agencies has retreated 20 basis points in the past two weeks. The equities markets, however, face a greater downside risk to rising interest rates.


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