US employers added new workers at a surprisingly strong rate in June after an unnerving stall in May, delivering a fresh sign of US economic strength, the Labor Department reported yesterday.
The much better-than-expected numbers gave a boost to markets in the US and Europe, battered down by worries that Britain’s vote to withdraw from the European Union will drag down economic growth.
But analysts remained cautious, saying it still waits to be seen whether the rebound from May will be sustained.
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.”
Markets reacted positively, with the S&P 500 on Wall Street adding 1.1%, the London FTSE 100 barometer rising 1% and Frankfurt’s DAX index gaining 2%.
With analysts saying the data increases the chances that the Federal Reserve will raise interest rates at least once before the end of the year, the dollar jumped to $1.1029 against the euro, compared with $1.1078 before the announcement. US bond yields, which had plunged in recent weeks with the 10-year Treasury hitting a record low, spiked higher in early trade.
The jobs report was not unequivocally good news.
Wage growth, another indicator of the strength of the employment market and the economy generally, slowed, 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 rejoining the workforce, diluting the impact of the hiring surge on the jobless rate.
In May the unemployment rate had fallen from 5% to 4.7% after the volatile data showed a huge number of people had dropped out of the labour force. 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 about the possible economic drag from Britain’s vote to withdraw from the European Union, 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.