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 The Labor Department said on Thursday nonfarm payrolls rose 223,000
last month after a downwardly revised 254,000 increase in May, with
construction and government employment unchanged, and the mining
sector purging more jobs.
April payrolls were also lowered, meaning 60,000 fewer jobs were
created during the two months than previously reported. The
unemployment rate fell two-tenths of a percentage point to 5.3
percent, the lowest since April 2008, but that was a sign of
weakness as 432,000 people dropped out of the labor force.
"While we've been seeing positive signs of the economy picking up
moving into the second half, this report certainly isn't pushing the
Fed to accelerate the liftoff timeline," said Ted Wieseman, an
economist at Morgan Stanley in New York.
Still, June's payrolls increase ran well above the average for the
first five months and the jobless rate is near the 5.0 percent to
5.2 percent range most Fed officials consider consistent with full
employment.
Before the report, interest rate futures were pricing in a more than
50 percent chance of a December hike, but bets shifted to early
2016. Economists still believe the Fed, which has kept its
short-term interest rate near zero since December 2008, will tighten
monetary policy this year.
The dollar fell marginally against a basket of currencies, while
prices for U.S. Treasury debt ended higher. U.S. stocks closed
little changed on festering worries over Greece's debt crisis.
From consumer spending to housing and consumer confidence, economic
reports had taken a decisively strong tenor since May, prompting
many forecasters to raise their second-quarter growth estimates to
above a 3 percent annual pace.
CAUTION URGED
The economy contracted at a 0.2 percent rate in the January-March
quarter. While the weak employment report raises the risk that
growth will slow in the third quarter, economists cautioned against
reading to much into the disappointing report as calendar and
seasonal quirks could have influenced the data.
The labor force participation rate fell to 62.6 percent, the lowest
since October 1977, from a four-month high of 62.9 percent in May.
"By far the biggest source of the increase in non-participants was
people transitioning from employment to not in the labor force,"
said Michael Feroli, an economist at JPMorgan in New York. "Far
fewer transitioned from unemployed to not in the labor force."
Economists had forecast nonfarm payrolls rising 230,000 last month
and the unemployment rate dipping to 5.4 percent.
Average hourly earnings were unchanged as mining and manufacturing
wages fell. However, manufacturing overtime touched a four-month
high in June. Average hourly earnings increased 2.0 percent in the
12 months through June, decelerating from 2.3 percent in May.
Anecdotal evidence and other measures of wage growth suggest
paychecks are getting fatter.
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State and local governments have raised the minimum wage and surveys
show entry-level wages for new college graduates are rising. In
addition, Walmart, the nation's largest private employer, has
announced wage increases twice this year.
Though construction payrolls were unchanged in June, construction
spending hit a more than 6-1/2-year-high in May. Residential
construction, building permits and new home sales are all at cycle
highs.
"With housing showing so much forward momentum, we find it hard to
accept that not a single net new person was hired in the
construction industry," said Bernard Baumohl, chief global economist
at The Economic Outlook Group in Princeton, New Jersey.
NOT ALL BAD
There were, however, some encouraging signs in the employment
report. Though the participation rate tumbled last month, other
labor market measures that Fed officials are eyeing as they
contemplate raising interest rates for the first time since 2006
improved significantly.
A broad measure of joblessness 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 to 10.5 percent, the lowest
since July 2008, from 10.8 percent in May.
The number of discouraged workers in June was the lowest since
October 2008. In addition, the number of long-term unemployed
continued to fall, touching its lowest level since late September
2008. Americans are also experiencing shorter spells of
unemployment.
Last month, factory jobs increased 4,000, adding to a 7,000 gain in
May. Retail payrolls rose a solid 32,900 and temporary help, a
potential harbinger of future permanent hiring, increased 19,800
jobs, the most since December.
The mining sector, however, lost 3,000 more jobs because of layoffs
in the energy industry. But the pace of declines is slowing. The
sector shed 18,000 jobs in May.
Oil-field companies, including Schlumberger, Baker Hughes and
Halliburton, have announced thousands of job cuts after a more
than 60 percent plunge in crude oil prices last year.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Meredith
Mazzilli)
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