Source: Bureau of Labor Statistics
Stronger than expected job growth in June plus higher revised numbers for April and May show the economy is on track but the road to recovery will be long and slow.
The US added 195,000 new jobs in June, while the unemployment rate remained unchanged at 7.6 percent. In addition, adjusted statistics show that job gains in April and May were even more than originally announced, up by 50 000 and 20 000 jobs respectively, making an even stronger case that the economy is getting stronger.
“Solid employment growth in June and upward revisions to previous months imply continuing support to both consumer spending and the recovery in housing,” Paul Ferley, Assistant Chief Economist at RBC, said in a report this morning.
The numbers certainly show the economy is slowly grinding into gear again, but if we continue gaining jobs at this pace, it will take a minimum of five years to return to a relatively healthy economy. The current level of growth is barely keeping up with the increase in working population, and economists estimate it could take until at least 2017 to get the unemployment and hiring rates back to pre-recession levels. That is, if everything goes well.
The unemployment rate is nowhere near the 6.5 that the Fed is looking for in order to end the QE3 altogether.
But Paul Dales, Senior US Economist at Capital Economics in Toronto, said the Fed will most likely go through with its plan to cut back on bond buying as soon as September.
“Any doubts that that Fed wouldn’t follow through on its plan to taper QE3 later this year in response to some of the recent weaker activity data have been dealt a major blow,” he said.
Despite the uptick, some economists warn that these numbers are far from idea.
“If it was 300 000 or maybe even 296 000, then I would maybe start to be happy,” said Heidi Shierholz, economist at the Economic Policy Institute, a liberal research organization,
She added that the government isn’t correctly using their monetary and fiscal tools the way they should to improve the economy, and that efforts such as the sequester aren’t working as well as planned.
Unsurprisingly, Federal government employment was down by 5000, out of a total 65 000 over the course of this year.
Though the labor force participation rate remained relatively the same at 63.5 percent, the employment to population ratio is up a point to 58.7.
“More people are looking for jobs, and getting them. And that’s a good thing,” said Steve Blitz, chief economist at ITG Investment research.
Average weekly hours worked remained relatively unchanged, with slight increase in the information sector, which jumped to 36.1 from 35.8 hours per week.
Following recent trends, employment in the leisure and hospitality sectors led the others, adding 75 000 jobs. Monthly job growth is double the rates last year, which could be a concern.
“It’s odd that something that is 8 percent of total employment is 25 percent of job creation. It’s a low-paying job,” said Blitz.
There are 8.2 million people working part time for economic reasons, either because their hours were cut or they couldn’t find a full-time job. It’s an increase of 322, 000 from last month.
Micha Burns, who has worked as a bartender at various pubs around New York City for over a decade, said that in recent years most newly hired waitresses, bartenders and busboys are taking the jobs to supplement other jobs that don’t pay enough.
“A lot of people are doing something else on the side,” she said. “Everyone is just doing whatever they can right now.”