The jobs report showed that non-farm payrolls jumped by 222,000 jobs in June, the Labor Department said on Friday, beating economists’ expectations for a 179,000 gain.
Data for April and May was revised to reveal 47,000 more jobs than previously reported.
Wage growth was unchanged from May and softer than expected. Average hourly earnings rose by 0.2% month-over-month, and 2.5% year-over-year.
The Federal Reserve looks like they were right when they said economic weakness in the first half of this year was transitory although I’d like the July jobs report to confirm this. The Fed seems on track for a possible rate increase toward the end of the calendar year as well as toward a decrease in the $4.5 trillion balance sheet.
President Donald Trump has vowed to boost economic growth and further strengthen the labor market by cutting regulation and slashing taxes.
May’s jobless rate was 4.3%. A wider measure of unemployment, including discouraged workers and those who are working part time but favor a full-time job, inched up from 8.4% in May to 8.6% in June. It’s pretty obvious that the trend in employment growth is strong enough to keep the unemployment rate trending down.
Wages are finally being raised by companies. I expect unfilled jobs to boost wage growth, which has remained low.
The labor-force participation rate inched up to 62.8%, from 62.7%.
While the hourly wage component is below consensus estimates, the more powerful headline payroll number coupled with upward revisions, suggest that wages should rise in the near to medium term. The gain in hours in the work week suggests that economic activity is picking up under the surface.
Average hourly earnings increased 0.2% in June after gaining 0.1% in May. That raised the year-over-year increase in wages to 2.5% from 2.4% in May.
Despite the lack of a big pick-up in wage growth and core inflation, the Fed will push forward with hiking interest rates. The unemployment rate is already unusually low and is likely to fall further over the coming months.
The increase in jobs reflected hiring of new graduates. Ultimately the millennial’s are starting to get more jobs. Hiring in the service sector was strong. Health care hiring was up. The retail, construction and manufacturing sectors were weak but the economy appears strong enough to absorb these workers. There does seem to have been a modest deceleration of hiring within the last 12 months and an average of 187K a month job creation is high enough to absorb any remaining slack in the US labor market. The market needs to create 75,000 to 100,000 jobs a month to keep up with growth in the population.
Economists had expected employment gains of between 175,000 and 178,000.
The most shocking number in the jobs report came from the retail sector. Retail hiring rose for the first time since January, pausing an exodus of jobs from large department stores that are losing ground to ecommerce. There were 8,100 workers added in retail breaking its 4 month losing streak.
The employment gains of June exceeded the average for 2016, reinforcing views that economic growth is back on track in the second quarter.
The most important thing is that jobs are out there, and job hunters with marketable skills are in a good position to move on or move up.
Construction added 16,000 jobs.
The Fed raised its benchmark overnight interest rate for the second time this year in June. But with inflation retreating in May, economists expect another rate hike in December.
Wages are certainly weaker than anticipated, so it keeps alive the whole debate regarding the relationship between slack and inflation and how far the Federal Reserve should allow the unemployment rate to fall.
The most jobs were contributed by the medical sector. No jobs were added by the coal sector.
As the labor market reaches toward full employment, the pace of job growth is expected to slow. There is growing anecdotal evidence of companies struggling to find workers and so I expect these companies to raise wages to fill the vacant jobs.
Government employment rebounded by 35,000 jobs.
The automobile sector lost 1,300 jobs as slowing sales and inventories induce manufacturers to cut back on production.