“The economy continues to power forward despite the uncertainty and geopolitical risks out there in the world,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “The economy is moving forwards, not backwards.”
Wall Street appeared to welcome the positive numbers, with the three major U.S. stock indexes gaining ground in morning trading. The blue-chip Dow Jones Industrial Average was up 0.9 percent at midday, with the broader Standard & Poor’s 500-stock index notching an increase of 0.8 percent. The tech-heavy Nasdaq rose a full percentage point.
The jobless rate has fallen by more than half since peaking at 10 percent in the aftermath of the Great Recession seven years ago. Many economists have begun to wonder whether the unemployment rate can fall much further. In addition, analysts have cautioned that job growth will eventually slow as businesses fill their open positions — still a positive sign for the economy.
In July, hiring was strong across almost every major industry. Professional and business services added 70,000 jobs, including computer systems designers, architects and consultants. Health care employment rose by 43,000, while the financial industry gained 18,000 jobs. Even the government hired more workers, adding 38,000 positions, primarily in local education. However, mining continued to suffer job losses.
The remarkable strength in the labor market has not been enough to overpower the broader forces holding back the economy. Growth clocked in at a disappointing 1.2 percent during the second quarter, just faster than the stall speed registered over the winter. The United States may have stood firm in the face of turmoil emanating from China and uncertainty surrounding Britain’s decision to leave the European Union, but the recovery has yet to take off.
Beyond the global headwinds is a disconnect between business investment and hiring at home. Tim Hopper, chief economist at TIAA Global Asset Management, noted that in a typical recovery companies hire more workers, who then use their paychecks to buy more goods and services. An increase in demand encourages businesses to spend more on equipment and technology, creating more jobs in a virtuous cycle of economic growth.
In this recovery, however, businesses have been loathe to invest, restraining the pace of the expansion.
“We have not seen that engagement this time,” Hopper said. “That’s the fundamental problem.”
The tepid economy has been a key issue on the presidential campaign trail, with populist frustration over stagnant wage growth and the slow grind of the recovery fueling support for unconventional candidates such as Republican nominee Donald Trump and former Democratic contender Sen. Bernie Sanders.
Trump has pledged to cut corporate tax rates, renegotiate free trade deals and label China a “currency manipulator.”
“The era of economic surrender will finally be over,” Trump said during a campaign event in Pennsylvania in June.
Trump is slated to deliver an economic address in Detroit on Monday. Though he handily won the GOP primary in Michigan, voters there supported President Obama in 2008 and 2012.