The US economy added a robust 222,000 jobs last month, outpacing economists’ predictions of 179,000, while data from April and May was revised upward by 47,000 jobs, Reuters reports:
While the unemployment rate rose to 4.4 percent from a 16-year low of 4.3 percent in May, that was because more people were looking for work, a sign of confidence in the labor market. The jobless rate has fallen four-tenths of a percentage point this year and is near the most recent Fed median forecast for 2017. The average workweek increased to 34.5 hours from 34.4 hours in May.
But stubbornly sluggish wage growth put a wrinkle in the otherwise upbeat report. Average hourly earnings increased four cents, or 0.2 percent, in June after gaining 0.1 percent in May. That lifted the year-on-year wage increase to 2.5 percent from 2.4 percent in May. … There is optimism that the tightening labor market will soon spur faster wage growth amid growing anecdotal evidence of companies struggling to find qualified workers.
Notwithstanding the lackluster wage gains, the jobs report is unlikely to deter the Federal Reserve from its plans to continue gradually raising its benchmark interest rate this year, but one economist suggests to the New York Times that the Fed might want to consider letting the unemployment rate keep falling:
“The payroll number is well above expectations,” said Jim O’Sullivan, chief United States economist for High Frequency Economics. “But the wage numbers are certainly weaker than expected, so it keeps alive the whole debate about the relationship between slack and inflation and how far the Federal Reserve should allow the unemployment rate to fall.”
A broader measure of unemployment, including discouraged workers and those who are working part time but prefer full-time work, inched up to 8.6 percent in June from 8.4 percent in May. Still, that figure is a point lower than it was this time last year. “It’s pretty clear that the trend in employment growth is strong enough to keep the unemployment rate trending down,” Mr. O’Sullivan said.
Bodhi Ganguli, lead economist at Dun & Bradstreet, tells the Wall Street Journal that the lack of wage growth “points to the underlying weakness in productivity, a structural problem that won’t be fixed overnight.” The Journal also points to a slight improvement in overall labor force participation, which has stalled at a frustratingly low level since the Great Recession:
The labor-force participation rate inched up to 62.8% in June from 62.7% the prior month. The rate, hovering near a four-decade low, has been little changed over the past year. Low participation is partly because the population is aging and more workers are retiring, though economic factors also are at play. Among prime-age workers, ages 25-54, the participation rate ticked up to 81.6%. It had bottomed out at 80.6% in September 2015. While there has been progress, the rate remains below its nearly 83% average in the two years before the recession.