WASHINGTON — The U.S. economy added 310,000 more workers last month, the government said Friday, a greater-than-expected surge that pushed wages up at their fastest pace of the year and lifted the odds that an inflation-wary Federal Reserve will raise interest rates later this month.
While the new jobs and extra pay were boons for the workers who won them, they represented powerful new evidence that the economy simply was not slowing as the Fed had hoped. That means the Fed, which already raised rates by one-quarter of a percentage point June 30, will tap on the economic brakes again soon, analysts said.
Higher interest rates would not necessarily end the happy mix of high growth, low unemployment and practically no inflation that the nation has enjoyed for more than three years. But analysts say they probably would mean that the days of trouble-free sailing were coming to a close--and that claims that the country has entered a "new era" of unfettered growth will wane.
"If this economy is slowing, you have to look pretty hard to find it," said Stuart G. Hoffman, chief economist of PNC Bank in Pittsburgh. "The Fed is seeing more job strength and more wage inflation than it likes."
Even America's perennially shrinking manufacturing sector added about 31,000 jobs in July, the sector's first serious employment gain in almost a year and a half.
The additions helped keep the nation's unemployment rate at 4.3%, just one tick above its 30-year low of 4.2%.
They also helped boost average hourly earnings 0.5% to $13.29. Over the last year, the wage measure, which covers about 85% of the U.S. work force and includes all but top-earning executives, managers and professionals, has climbed 3.8%, it said.
The overall job gain was more than half again as large as the consensus of analysts' forecasts. The economy has added jobs at an average of 208,000 per month since January.
The new signs of the economy's strength unsettled the nation's financial markets. The Dow Jones industrial average bounced up and down before losing 79.79 points, or 0.7%, to close at 10,714.03. The Standard & Poor's 500 index dropped 1%, and the Nasdaq composite index fell 0.7%. The price of the widely watched 30-year Treasury bond continued a three-week decline that has pushed its yield (or market interest rate) up to 6.18%.
