The US economy created 287,000 jobs in June, rebounding strongly from disappointing growth in May. The figure was much stronger than forecasted, and the dollar and yields on US government bonds rose in the belief a US rate rise was now more likely. The US job growth likely rebounded in June as employees returned to work and wages probably rose steadily, more evidence the economy has regained speed after a first-quarter lull. The Labour Department’s jobs tally is likely to show nonfarm payrolls increased by 175,000 jobs last month after a meagre 38,000 gain in May, according to a Reuters survey of economists. The unemployment rate is forecast rising to 4.8% from an 8-1/2-year low of 4.7% a month earlier as some job seekers returned to the labour market. The change in the jobless rate reflected a rise in the number of people registering that they were looking for work, generally regarded as a sign of confidence in the economy. The growth in jobs was seen across a variety of sectors. Manufacturing employment – which had dropped by 16,000 in May – rose by 14,000, there were 29,900 more jobs in the retail sector, and the leisure and hospitality sectors gained 59,000 jobs.
May’s weak jobs figure had been depressed by a strike by 35,000 Verizon workers. Their return to work helped to boost information technology employment by 44,000.
The Labour Department figures indicated that wage growth remained tepid, rising by just 0.1% in June from the month before. However, earnings were 2.6% higher compared with June last year, up from a rate of 2.5% in May.
Market watchers welcomed the stronger-than-expected jobs figures Although the Federal Reserve held off on raising interest rates in June due to the possibility of market turbulence after Brexit and worries about the latest US job report. The US central bank last met on 14 and 15 June. It was the Fed’s fourth meeting since it raised interest rates in December. Last year’s hike was the first one in almost a decade. The Fed was expected to raise interest rates four times this year. The forecast has since been adjusted to just two hikes in 2016. Even with June’s jobs bounce back, forward momentum in the labour market has slowed. Job gains averaged 282,000 per month in the fourth quarter, but employment has increased by an average of only 150,000 jobs per month over first five months 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 labour market now near full employment.
The labour market is slowing because the business cycle is slowing. Stronger payroll gains in June would add to data on consumer spending and housing in suggesting that economic growth accelerated from the first-quarter’s anaemic 1.1% annualized rate. The Atlanta Federal Reserve Bank is currently forecasting the economy growing at a 2.4% pace in the second quarter.
Tightening labour market conditions are expected to start putting upward pressure on wages. Average hourly earnings are forecast increasing 0.2% in June after a similar gain in May. The year-on-year gain in earnings could rise as high as 2.7% after advancing 2.5% in May.