US job growth strong but unemployment rate rises to 4%
Latest payrolls data points to steady growth and modest inflation pressures
US President Donald Trump gestures during a Make America Great Again rally in Great Falls, Montana. Photograph:Joshua Roberts/Reuters
US job growth increased more than expected in June as manufacturers stepped up hiring, but steady wage gains pointed to moderate inflation pressures that should keep the Federal Reserve on a path of gradual interest rate increases.
Non-farm payrolls increased by rose by 213,000 jobs last month, the Labor Department said on Friday. Data for April and May was revised to show 37,000 more jobs created than previously reported. The economy needs to create roughly 120,000 jobs per month to keep up with growth in the working-age population.
The unemployment rate rose to 4.0 per cent from an 18-year low of 3.8 per cent in June as more people entered the labor force in the sign of confidence in the jobs market.
The labour force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to 62.9 per cent last month from 62.7 percent in May. It had declined for three straight months.
Average hourly earnings rose five cents, or 0.2 per cent in June after increasing 0.3 per cent in May. That kept the annual increase in average hourly earnings at 2.7 per cent.
The moderate wage growth should allay fears of a strong build-up in inflation pressures. The Fed’s preferred inflation measure hit the central bank’s 2 per cent target in May for the first time in six years.
Minutes of the Fed’s June 12th-13th policy meeting published on Thursday offered an upbeat assessment of the labor market. The U.S. central bank increased interest rates last month for the second time this year and has projected two more rate hikes by year end.
With a record 6.7 million unfilled jobs in April, economists are optimistic that wage growth will accelerate later this year.
Economists polled by Reuters had forecast nonfarm payrolls increasing by 195,000 jobs last month and the unemployment rate steady at 3.8 per cent. The employment report added to data such as consumer spending and trade that have suggested a sharp acceleration in economic growth in the second quarter.
Gross domestic product estimates for the April-June period are above a 4 per cent annualized rate, double the 2.0 per cent pace logged in the first quarter. But the Trump administration’s “America First” trade policy, which has left the United States on the brink of trade wars with other major economies poses a risk to the labor market and economy.
President Donald Trump has imposed tariffs on a range of imported goods, including steel and aluminum, to protect domestic industries from what he says is unfair competition from foreign manufacturers.
Major trade partners, including China, Canada, Mexico and the European Union, have retaliated with their own tariffs. The US and China slapped tit-for-tat duties on $34 billion worth of the other’s imports on Friday.
Economists expect the manufacturing sector to bear the brunt of the tit-for-tat tariffs, through a slowdown in hiring and capital expenditure. - Reuters