Employment: Jobless rate drops in US, wages grow

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US employment increased at a solid pace in July while wages rose at a faster-than-expected clip, consistent with sustained labour demand that’s at the root of renewed momentum in the economy. The unemployment rate unexpectedly dropped to 3.5%, one of the lowest in decades.

Still-healthy job and income gains point to an economy capable of weathering a period of rapid interest-rate increases aimed at thwarting high inflation. That’s also contributing to renewed confidence among consumers, which may bode well for spending and growth.
That said, pay growth has been showing signs of slowing, as the supply and demand for workers comes more into balance following years of pandemic-induced labour shortages.

Combined with inflation that’s running at the slowest pace in over two years, the data support growing calls that the Fed can tame price pressures without inducing a recession. Policymakers resumed hiking rates last week and left the door open for more, and Friday’s figures will help shape their decision in September.