U.S. economy posts
largest job gains in eight months in June
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[July 09, 2016]
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth
surged in June as manufacturers and other employers boosted hiring,
confirming the economy has regained speed after a first-quarter lull,
but tepid wages suggested the Federal Reserve will probably not raise
interest rates soon.
Nonfarm payrolls increased by 287,000 jobs last month, the largest gain
since last October, the Labor Department said on Friday. May payrolls
were revised sharply down to show them rising 11,000 rather than the
previously reported 38,000.
The sign of strength in the economy, however, precedes Britain's
stunning vote last month to leave the European Union. The so-called
Brexit referendum on June 23 roiled financial markets, raising fears
that sustained volatility might hit companies' hiring and investment
"For the Fed, this report is likely to offer some encouragement on the
underlying labor market backdrop, though it is unlikely to change the
current 'wait and see' policy stance as they assess the fallout from the
Brexit vote," said Millan Mulraine, deputy chief economist at TD
Securities in New York.
The Fed raised rates in December for the first time in nearly a decade.
Financial markets expect no further increase this year, but economists
believe a December hike is possible if the economy continues to grow and
add jobs at a steady clip.
Last month's payrolls tally beat economists' expectations for an
increase of 175,000 jobs. While the unemployment rate rose two-tenths of
a percentage point to 4.9 percent, that was because more people entered
the labor force, a sign of confidence in the jobs market.
With the jobless rate rising, average hourly earnings increased only two
cents or 0.1 percent in June, suggesting some slack still remains in the
labor market. That took the year-on-year gain in earnings to 2.6 percent
from 2.5 percent in May.
Economists say wage growth of between 3.0 percent and 3.5 percent is
needed to lift inflation to the Fed's 2.0 percent target. A top Fed
official said this week the central bank would like to see inflation
accompanied by wage gains.
"Wage growth remains subdued, which could reflect the fact that there is
still slack in the labor market," said Michelle Meyer, a senior
economist at Bank of America Merrill Lynch in New York. "Or perhaps it
is a function of low inflation expectations and low productivity, which
restricts the ability or desire of businesses to raise wages."
U.S. stocks rallied on the employment data, with the main indexes rising
more than 1 percent. Prices for longer-dated U.S. government debt rose,
while the dollar was little changed against a basket of currencies.
The strong rebound in June payrolls added to data on consumer spending
and housing in suggesting that economic growth accelerated from the
first-quarter's anemic 1.1 percent annualized rate. The Atlanta Fed is
currently forecasting the economy growing at a 2.4 percent pace in the
[to top of second column]
A Chrysler Group LLC assembly worker puts together the front end of
a 2014 Ram 1500 pickup truck on the assembly line at the Warren
Truck Plant during a tour of the plant's redesigned work stations in
Warren, Michigan, in this September 25, 2014 file photo.
Manufacturing employment increased 14,000 last month after shedding 16,000 jobs
in May. Although manufacturing only accounts for 12 percent of the economy, it
is considered a leading growth indicator.
The retail sector added 29,900 jobs, more than reversing the prior months'
weakness. The leisure and hospitality sector gained 59,000 jobs, the most in
nearly 1-1/2 years. Temporary-help jobs, a harbinger for future hiring,
Healthcare and social assistance payrolls jumped 58,400. The return of 35,100
Verizon workers, who were excluded from May's payroll count while on a
month-long strike, boosted information sector employment last month.
Government added 22,000 jobs, but construction payrolls were unchanged after two
months of declines and mining lost another 5,000 positions.
Despite job gains in June being the best for the year, forward momentum in the
labor market has slowed. Job gains averaged 282,000 per month in the fourth
quarter, but employment has increased by an average of only 171,500 jobs per
month in the first half of this year.
Economists say the deceleration is normal given the relatively advanced age of
the economy's recovery from the 2007-09 recession, with the labor market now
near full employment.
The labor force participation rate, or the share of working-age Americans who
are employed or at least looking for a job, rose one-tenth of percentage point
to 62.7 percent.
A broad measure of unemployment that includes people who want to work but have
given up searching and those working part-time because they cannot find
full-time employment fell 0.1 percentage point 9.6 percent, the lowest since
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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