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What's going on?
Similar to June, far more jobs were added in the US in July than economists expected (although May was a very weak month). It flies in the face of the weaker than expected growth rate for the overall economy that was reported 10 days ago.
What does this mean?
The environment appears to be weak for American businesses: they are decreasing spending on things like machinery and inventories (e.g. on restocking products to sell to customers). Yet, they appear to be hiring lots of workers. Its a weird inconsistency for sure and economists are busy theorizing explanations. Whatever the reason, Fridays data had a bunch of good news for US workers: more are getting hired and pay is increasing at the fastest pace since 2009 which has led to strong consumer spending.
Why should I care?
The bigger picture: Higher pay makes it tougher for companies to make money.
Employee pay is a huge part of most companies costs. As wages go up, more companies might say that they are making less money as a result. So keep an eye out for this when companies report on their performances…
For you personally: In the US, pay is increasing faster than the prices of stuff.
Prices of things, a.k.a. inflation, have risen about 1-1.5% in the past year (depending on the measurement used), but pay increased 2.6% over the same time period. That means more is leftover in the pockets of Americans and more tends to get spent on discretionary items like in-app Pokemon purchases and drinks on a Saturday night. The opposite might start occurring in Britain if inflation increases and the economy struggles.
Originally posted as part of the Finimize daily email.
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