US economy adds 287,000 jobs in June

WASHINGTON: US employers added new workers at a surprisingly strong rate in June after an unnerving stall in May, in a clear demonstration of economic resilience, the Labor Department reported Friday.


The much better-than-expected numbers gave a boost to markets in the US and Europe, which have been battered down by worries that Britain’s vote to withdraw from the European Union will drag down economic growth.

Private businesses and government authorities across the United States generated 287,000 new positions last month, 112,000 more than analysts had expected.

The strongest hiring was in the health care, hospitality, information and retail sales sectors, while government hiring also picked up.

That largely compensated for the poor numbers from May that had shocked policymakers and markets, sending the dollar lower and contributing to the Federal Reserve’s decision last month to put off an interest rate hike.

The May job creation numbers in fact were revised downward in Friday’s data from the original 38,000 reported to just 11,000.

June’s hiring levels boosted the monthly average of the last three months to a solid 147,000, which economists say is adequate to keep bringing down unemployment overall.

“This is a good trend but nothing spectacular. It suggests that hiring has taken a step down since late last year but that job growth is still strong enough to absorb slack in the labour market,” said analysts at Nomura Global Economics in a client note.

“Most important, today’s report quells any concerns of a broader economic slowdown in the US.”

Market reaction

Markets reacted positively, with the S&P 500 surging 1.5% to a fraction shy of an all-time record.

In Europe, Frankfurt’s DAX index gained 2.2%, Paris’s CAC 40 added 1.8%, while in London the FTSE 100 barometer rose 0.9%.

As analysts said the data increases the chances that the Federal Reserve will raise interest rates at least once before the end of the year, early in the session the dollar jumped and US bond yields, which had plunged in recent weeks, spiked higher.

But by the end of the day the dollar had retrenched to $1.1050 per euro, only slightly up from Thursday. And the yield on the 10-year Treasury bond fell to a new all-time low of 1.366%.

Other numbers

The jobs numbers were not unequivocally good. Wage growth, another indicator of economic strength, slowed slightly, bringing the annual pace for the last three months to 2.5%, compared with the 12-month rate of 2.6%.

And the unemployment rate, which is based on a separate database from the job creation numbers, rose by 0.2 percentage points to 4.9%, though still near the lowest level in more than eight years.

That rise was mainly due to a large jump in the number of people reported re-joining the workforce, diluting the impact of the hiring surge on the jobless rate.

In May the unemployment rate had fallen from 5.0% to 4.7% after the volatile data showed a huge number of people had dropped out of the labour force.

Road ahead

Analysts remained cautious over what the hiring surge means for the economy going ahead, saying US businesses could remain cautious in the coming months, concerned Britain’s vote to withdraw from the European Union, which is expected to hit economic growth in Britain and Europe.

“We believe the trend remains more than strong enough to keep the unemployment rate declining over time, consistent with additional upward pressure on wage gains,” said Jim O’Sullivan, chief US economist at High Frequency Economics.

But O’Sullivan expects the Federal Reserve will continue to keep US interest rates on hold at its end-July meeting.



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