Surge in hiring calms fears about the economy — for now
The strong rebound in hiring last month, after almost zero new jobs were added in May, allayed worries that the long recovery in the labor market and the economy was coming to an abrupt end.
“We can all breathe a big sigh of relief,” said Harry Holzer, a Georgetown University professor and former chief economist at the Labor Department.
Friday’s government report showing growth of 287,000 jobs last month -- following revised gains of just 11,000 in May and 144,000 in April -- will bolster confidence among employers and policymakers at the Federal Reserve that the expansion in the labor market and the broader economy remain on track.
The figures fueled a big rally on Wall Street on Friday, with the broad-market S&P 500 closing near a record high and other major stock indexes also surging.
But analysts said it would not be enough to push the Fed to raise interest rates later this month or possibly even in September, given the increased risks created by Britain’s surprising vote to leave the European Union. Analysts expect at most one rate hike this year.
The Fed will “still be watching and waiting with concerns about the Brexit vote,” said Alan Levenson, chief economist at Baltimore-based T. Rowe Price Group. “These data don’t show you anything about that,” he said, noting that the latest employment survey was taken before the June 23 referendum.
In short, the latest snapshot from the Bureau of Labor Statistics essentially sets things back to where they were before the lull in May. And that means the same slow and steady -- some would say fragile -- growth that has marked much of the recovery.
Economists don’t expect a repeat of June’s robust hiring anytime soon, but instead something closer to an average of 150,000 in coming months, which would still mark a slowdown from the monthly pace of nearly 200,000 in the first quarter and a 229,000 average last year.
Still, the latest jobs report was welcome news for Hillary Clinton, the presumptive Democratic presidential nominee. Another month of weak hiring would have dealt a blow to her political fortunes as they are inextricably linked to the performance of President Obama and the economy.
Neither Clinton nor Donald Trump, her likely Republican opponent in November, immediately commented on the jobs report, as Trump did a month ago when he spotlighted the poor hiring. But Jason Furman, Obama’s chief economic advisor, hailed the bounce-back in hiring, saying it is “a clear indication that the economy continues to make solid progress.” The nation has added 14.8 million private-sector jobs since early 2010, he noted in a statement.
Friday’s report said the unemployment rate edged back up to 4.9%, from 4.7%, as large numbers of people who had dropped out of the labor force in May returned, either finding jobs or adding their names to the unemployment rolls.
Average pay of workers, meanwhile, went up a mere 2 cents an hour last month, to $25.61, after three prior months of rising at a faster clip. The June hourly-pay figure is up 2.6% from a year ago, ahead of inflation but nonetheless modest, especially given the long stagnation in real incomes for many households.
With the economy getting very close to full employment, experts expect businesses to step up wage increases in coming months. The number of involuntary part-time workers dropped significantly in June. And separate Labor Department data and surveys by the National Federation of Independent Business suggest job openings are ample but that employers are having increasing troubles finding qualified workers.
Job growth last month came mostly from retailers, healthcare and social-assistance providers and the large restaurant and recreation industry. While healthcare offers a mix of high- and low-paying jobs, the other sectors generally provide low wages. The June job numbers were also inflated by the return of approximately 35,000 Verizon workers who were on strike the previous month.
Michael Bernick, who follows the California labor market for the San Francisco law firm Sedgwick, said Friday’s report bodes well for California’s employment prospects. “After May, there was concern that the great job growth, especially in the last two years, might be halted,” he said, but “this suggests California’s job growth is likely to be strong.” The state’s jobs data for June is to be reported July 22.
Bernick added, however, that “most people looking out don’t see the economy doing particularly well or feel secure about their situation.” Among the reasons, he said: the large number of people working part-time, as independent contractors, at outsourcing firms and in some kind of project-based employment that is inherently less stable. “These numbers are capturing only part of what is going on,” he said of the government’s monthly jobs report.
Bill Spriggs, chief economist at the AFL-CIO, said things remain tough for working-class Americans. He noted the flat hiring last month in construction and durable manufacturing such as machinery-making, two relatively well-paying areas that in decades past had provided more opportunities for lesser-educated workers. Construction continues to be held back by weakness in young people going out on their own, he said, while manufacturing faces headwinds from a slowing global economy, with new threats now coming after Britain’s vote to quit the EU.
Friday’s jobs report is “reassuring, but it’s not like we’re going gangbusters,” he said. “It puts us back on a path of moderate growth.”
1:41 p.m.: This article has been updated with reaction on Wall Street.
11:26 a.m.: This article has been updated with additional reaction and analysis.
6:21 a.m.: This article has been updated with staff reporting and additional details.
This article was originally published at 5:36 a.m.
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