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Jobs Numbers Suggest A Healthy Economy — And May Let Fed Nudge Rates Up

DAVID GREENE, HOST:

OK. Now, in any presidential election, the health of the U.S. economy can weigh on voters' minds. One important measure, of course, is unemployment and job creation. Today, the government released new job numbers for July. As NPR's John Ydstie reports, they showed solid job growth with 215,000 new jobs added to the economy.

JOHN YDSTIE, BYLINE: The job's number came in pretty much where analysts had predicted. And the unemployment rate remained steady at about 5.3 percent. Nariman Behravesh, chief economist at IHS, says it was a good though not spectacular report. He says the 215,000 new jobs in July and a small upward revision in May and June suggest the economy continues to move forward at a moderate rate. One positive detail, manufacturing added 15,000 new jobs after several weak months.

NARIMAN BEHRAVESH: It might be that the manufacturing industries are beginning to adjust to a stronger dollar. And having tightened their belts, they're now competitive again and may be able to engineer better growth, even in a strong dollar environment.

YDSTIE: Another positive is a return to growth in hourly wages. They were up two-tenths of a percent after no growth in June. Behravesh says today's report is strong enough to support an interest rate hike by the Fed in September.

BEHRAVESH: I think if the Fed is looking for reason to begin the tightening cycle, our guess is that this report provides that rationale.

YDSTIE: But, he says, Fed officials who want to hold off raising rates also still have an argument. Wage growth remains sluggish and isn't adding to inflation. And price inflation is well below the 2 percent level that the Fed believes provides the best environment for growth.

BEHRAVESH: This is a huge debate that's going on within the Federal Reserve system and, of course, in academia and among analysts. And I think the consensus seems to be jelling around the fact that there's no wage inflation now. But the way things are going, we could start to see wage inflation.

YDSTIE: And, Behravesh says, the consensus seems to be the Fed should be preemptive and start raising interest rates before rapid wage inflation takes hold. Another reason the Fed is likely to raise rates in September, he says, is that it's been talking about doing it for so long. In fact, he says, it's the longest drumroll in Fed history. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.