US job growth surges, unemployment rate near six-year low
Jul 04 2014 , Washington
Nonfarm payrolls increased by 288,000 jobs last month and the unemployment rate fell to 6.1% from 6.3% in May, the Labor Department said on Thursday. Data for April and May were revised to show a total of 29,000 more jobs created than previously reported.
In addition, the ranks of the long-term unemployed shrank and the share of Americans with a job hit its highest level since August 2009. Job gains were widespread across sectors and there were few signs of inflationary wage pressures.
"It's a strong report, there is no question about it. The labor market is improving at a seemingly stronger rate than before, the slack is being absorbed, we are chipping away," said Josh Feinman, chief global economist at Deutsche Asset & Wealth Management in New York.
Employment has now grown by more than 200,000 jobs in each of the last five months, a stretch not seen since the technology boom in the late 1990s. That added to signs a plunge in economic output in the first quarter was a weather-driven anomaly.
Job growth averaged 231,000 per month in the first half of the year, the best start since 2006.
US stocks rose on the data, with the Dow Jones industrial average closing above the 17,000 threshold for the first time. Prices for US Treasuries fell and the US dollar advanced against a basket of currencies, as traders bet on an earlier interest rate hike from the Federal Reserve.
Rate futures moved to show a 58% probability of an increase in June 2015, up from 51%. JPMorgan moved up its forecast for a rate hike to the third quarter of next year from the fourth quarter, while Goldman Sachs acknowledged it could come sooner than its call for the first quarter of 2016.
"With additional, similar reports in the coming months, we believe the timing of the Fed policy turning point could be moved from late in 2015 to earlier in the year," said Doug Handler, chief US economist at IHS Global Insight in Lexington, Massachusetts.
LABOR MARKET TIGHTENING
The jobless rate reached its lowest level since September 2008 despite a swelling of the labor force.
Nevertheless, the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, was steady at 62.8%, a low struck in December for the first time since 1978.
A broader measure of unemployment, which includes people who want a job but have given up searching and those working part-time because they cannot find full-time jobs, fell to 12.1%, the lowest level since October 2008.
The unemployment rate for Americans who have been out of work for at least 27 weeks fell two-tenths of a%age point to 2.0%, the lowest since February 2009.
These long-term jobless accounted for 32.8% of the 9.5 million jobless Americans, down from 34.6% in May. The median duration of unemployment fell to a more than five-year low of 13.1 weeks.
But there was a jump in the number of people working part-time even though they want a full-time job.
Fed Chair Janet Yellen has cited low labor force participation and high levels of long-term unemployed and part-time workers as evidence of job market slack that could allow the central bank to bide its time before raising borrowing costs.
The Fed has held overnight rates near zero since December 2008.
"We believe that continued labor market pessimism from the Fed will only serve to boost concerns about inflation," said Drew Matus, an economist at UBS in New York. "We continue to believe that there is little slack in the labor market."
Job gains were spread across all sectors. Services industries employment jumped by 236,000, the biggest gain since October 2012, while manufacturing payrolls increased by 16,000, an 11th straight monthly rise. Construction jobs advanced for the sixth consecutive month and government employment increased by 26,000.
The length of the average workweek held at a post-recession high of 34.5 hours. Total hours worked rose 0.2%.
Separate data on Thursday showed services sector activity expanded strongly in June, while a third report showed exports hit a record high in May, helping to narrow the US trade deficit. Still, trade is expected to weigh on growth in the April-June period for a second consecutive quarter.