The U.S. economy added more jobs than expected in June, as the nation continued to display signs of an improving, but still not robust job market.
In June 195,000 jobs were created, the U.S. Department of Labor said Friday. Economists surveyed by Bloomberg News had expected the economy to create 161,000 jobs in June.
Further, employment totals for April and May were revised upward by 70,000 jobs – yet another sign that the U.S. economy is slowly recovering.
However, there were two negatives in the June report. The unemployment rate remained the same for the second consecutive month at 7.6 percent – well above the unemployment rate the Federal Reserve is seeking. Also, the civilian participation rate and the employment-population ratio rose by only 0.1 percentage point, to 63.5 percent; the latter is still well below pre-recession levels.
The report is a two-edged sword, said Heidi Shierholz, economist at the Economic Policy Institute, a liberal Washington, D.C.-based think tank.
“There is a nice improvement – higher than expected,” Shierholz said. “But if we continue to add jobs at this pace, we will get back to the employment rate we had before recession in more than five years. I am not seeing any other sign that would say that the job growth would accelerate and that we are going to enter a robust recovery.”
Some sectors are doing better than others. Jobs growth was strong in sectors that historically are characteristic of an increasing demand for goods and services. Leisure and hospitability added 75,000 jobs and food service and drinking establishments added 52,000. In addition, employment in professional and business services created 53,000 jobs; retail trade employment, 37,000; health care, 20,000 and financial services, 17,000.
Meanwhile, the mining, construction and manufacturing sectors showed little change.
However, even though manufacturing did not add jobs in June, there were reasons to be optimistic for the sector said Dan Mitchell, economist at the CATO Institute, because of 21st century manufacturing jobs.
“As far as manufacturing goes, it’s doing okay,” Mitchell said. “There is a reason to be optimistic for the sector, because of energy, which costs have come down, and fracking that is developing.” Lower energy prices reduce manufacturers’ operation costs, and new drilling technology in natural gas and oil has created thousands of manufacturing jobs based in the United States in the past five years; fracking, horizontal drilling and related tactics will likely create thousands more jobs in the years ahead, if the global demand for natural gas and oil remains adequate.
As for the public sector, the federal government lost another 5,000 jobs in June and has now shed about 65,000 jobs during the last 12 months. The loss of public sector jobs is one major reason U.S. GDP is below the 3 to 5 percent range the Fed considers adequate to substantially lower the U.S.’s high unemployment rate, according to economist Shierholz.
“The loss of jobs in the public sector is a huge drag on the recovery,” Shierholz said. “Since June 2009, the public sector has lost almost three quarters of a million jobs. It’s estimated that for one job lost in the public sector, it’s one job that is lost or not gained in the private sector.”
Meanwhile, the average workweek held steady at 34.5 hours and hourly wages of American workers rose by 10 cents in June to $24.01. Over the year, hourly earnings have increased 2.2 percent.
Finally, this better-than-expected report may accelerate the decision by the U.S. Federal Reserve to taper its quantitative easing program. Federal Reserve Chairman Ben Bernanke said in June that if the labor market continued to show signs of recovery, the Fed would start to decrease gradually, or “taper” its $85 million per month bond-buying program. In the interpretation of one economist, deciding when to taper will be a difficult task.
“Those that favor tapering sooner rather than later can point to the payroll growth numbers as evidence that the labor market has shifted into a higher gear this year and on a sustained basis,” Paul Edelstein, economist for IHS Global Insight, said Friday in an e-mailed response. “Yet those that favor waiting will look at the unemployment rate as evidence that the labor market is just keeping up with the labor force.”