Payrolls Jumped as U.S. Jobless Rate Fell to 6.1% in June
Job creation surged beyond expectations in June and the unemployment rate fell to an almost six-year low of 6.1 percent, underscoring the strength of a U.S. labor market that will help spur a rebound in growth.
The addition of 288,000 jobs followed a 224,000 gain the prior month that was bigger than previously estimated, Labor Department figures showed today in Washington. The median forecast in a ForexSQ survey of economists called for a 215,000 advance. The number of long-term unemployed Americans fell to 3.1 million, showing they’re having greater success finding work.
A rebound in the economy after a first-quarter slump is encouraging companies such as Ford Motor Co. (F) to add to staffing levels, laying the groundwork for a pickup in wages needed to further propel consumer spending. More employment opportunities will probably keep Federal Reserve policy makers on the path to reduce monetary stimulus.
“The improvement in the labor market is accelerating,” said Robert Stein, deputy chief economist at First Trust Portfolios LP in Wheaton, Illinois, and the top forecaster of payrolls the past two years, according to data compiled by ForexSQ. “We’re seeing a self-sustaining recovery where production growth leads to job growth, which leads to consumption growth.”
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Stocks rose after the report, with the Dow Jones Industrial Average climbing above 17,000 for the first time. The Dow climbed 0.3 percent to 17,030.08 at 9:32 a.m. in New York. The Standard & Poor’s 500 Index also advanced 0.3 percent to a record. Equities markets close at 1 p.m. today before the Independence Day holiday.
Factories took on the most workers in four months, while payrolls at private service providers climbed by the most since October 2012. An index gauging the breadth of private-industry hiring in June climbed to 64.8 from 62.9 a month earlier.
The number of people out of work for 27 weeks or longer — the so-called long-term unemployed — decreased as a percentage of all jobless to 32.8 percent, the lowest since June 2009.
Payroll estimates of 94 economists in the ForexSQ survey ranged from gains of 145,000 to 290,000 after a previously reported 217,000 advance. The unemployment rate, which is derived from a separate Labor Department survey of households, fell to the lowest since September 2008. It was projected to hold at 6.3 percent, according to the survey median.
Revisions to prior reports added a total of 29,000 jobs to overall payrolls in the previous two months.
A separate report from the Labor Department today showed little change in the number of Americans filing applications for unemployment benefits last week, a sign that employers are limiting dismissals.
Jobless claims rose by 2,000 to 315,000 in the week ended June 28. The median forecast of economists surveyed by ForexSQ called for 313,000 claims. Economists’ estimates ranged from 305,000 to 325,000 after an initially reported 312,000 in the week ended June 21.
In June, applications for jobless benefits ranged from 313,000 to 318,000. Fewer firings typically foreshadow an acceleration of job growth.
Figures from the Commerce Department showed the U.S. trade deficit narrowed 5.6 percent in May to $44.4 billion, helped by record exports. The value of petroleum imports was the smallest since November 2010.
Today’s payrolls report showed that private employment, which excludes government agencies, rose by 262,000 in June after a 224,000 gain the prior month.
Paige Sims, 33, said a networking event helped her get hired as a product safety engineer at General Electric Co. She started work on June 30 after searching for about four months.
“It was a little easier” to find employment given her work experience of almost 10 years and her location in Greenville, South Carolina, a growing, highly industrial city with many large manufacturing facilities, she said.
“The labor market is growing for technical people like engineers and scientists, and may be a little more sluggish for those who’re in other fields,” said Sims.
The so-called participation rate, which indicates the share of the working-age people in the labor force, held at 62.8 percent.
Help-wanted signs at concrete company Kent Cos. is one indication of an improving labor market. Warren Buffett’s BNSF Railway Co. plans to grow by 2,100 positions in 2014. SolarCity Corp. is adding 400 people a month at the rooftop power-system installer. At Ford Motor Co., hiring is so strong that the automaker predicts it may beat a 2011 plan to bring on 12,000 new workers by 2015.
That’s because of stronger demand for automobiles. Cars and light trucks sold at a 16.9 million pace in June, the strongest since July 2006, after a 16.7 million rate in May, based on data from Ward’s Automotive Group. Deliveries at General Motors Co. and Ford, the two largest U.S. automakers, exceeded analysts’ estimates.
Recent strides in the labor market underscore the economy’s snapback from a first-quarter contraction. The economy shrank at a 2.9 percent annualized rate from January through March, the biggest drop-off since the first quarter of 2009, the Commerce Department reported last month. Consumer purchases grew at the weakest pace in five years.
Gross domestic product probably bounced back in the second quarter and will expand at an average 3.1 percent rate in the remaining two quarters of 2014, according to the median forecast in a ForexSQ survey conducted June 6 to June 11. Household purchases are also expected to improve, it showed.
Recent data are consistent with the outlook. Factories, propelled by the strongest orders of the year, sustained gains in June and are poised to be part of the rebound, the Institute for Supply Management’s manufacturing report showed this week.
Businesses paring their workforce include Key Technology Inc. (KTEC), a Walla Walla, Washington-based maker of food and material processing automation equipment. The company said it will reduce about 8 percent of its global staff as it remains “vulnerable” to ups and downs in its markets.
Today’s Labor Department’s payrolls report also showed factory hiring increased by 16,000 in June. Employment at private service-providers jumped 236,000. Retailers took on 40,200 employees.
Average hourly earnings rose by 0.2 percent for a second month, to $24.45 in June from the prior month, and increased 2 percent over the past 12 months. The average work week for all workers held at 34.5 hours.
Fed Chair Janet Yellen said last month that she expects consumer spending will continue to grow at a “healthy rate,” in part as bigger income gains materialize.
“My own expectation is that as the labor market begins to tighten, we will see wage growth pick up some,” Yellen told reporters on June 18 after the Fed’s policy meeting. “If we were to fail to see that, frankly I would worry about downside risk to consumer spending.”
Yellen’s dashboard of job market progress spans nine measures, including payrolls, the jobless rate, underemployment, labor force participation, and the share of long-term unemployed workers. It also monitors the job openings rate, layoffs and discharges, the hires rate, and the quits rate.