Published: Sun, July 08, 2018
Markets | By Otis Pena

5 important takeaways from the June jobs report

5 important takeaways from the June jobs report

Employers in the United States are thought to have kept up their brisk pace of hiring in June, reflecting the durability of the second-longest USA economic expansion on record even in the face of a trade war with China.

The unemployment rate moved up last month despite the addition of new jobs because almost 76,000 more people entered the workforce. While improving prospects for employment and wages are helping attract people from the sidelines of the job market, the retirements of older workers are among factors that have been exerting downward pressure on participation.

While economists say the tax cuts are boosting growth this year, they warn that Trump's actions on trade could have damaging impacts on the economy and jobs. Yet its path ahead is uncertain.

Some companies will likely respond to the tariffs by putting their hiring plans on hold until the trade picture becomes clearer. The majority of the increase is in support activities for mining.

Jim O'Sullivan, chief United States economist at High Frequency Economics, said gains have averaged 215,000 month so far this year, up from 182,000 "more than strong enough to keep the unemployment rate trending down over time".

From Table B-3, average hourly earnings were +2.7% year over year in June economy-wide, while average weekly earnings were +3.0%.

The lack of wage growth is disappointing, but still higher than the rate of inflation, said Douglas Holtz-Eakin, president of the American Action Forum. Even with more and more jobs, annual wage growth has remained stubbornly below 3% since early 2009.

The ranks of unemployed people seeking jobs jumped by 499,000 in June, which caused the unemployment rate to rise from its previous 18 year-low. "It indicates that we have more labor market slack". But significant pay gains have yet to emerge in the economic data. The average work week for all private employees was unchanged at 34.5 hours.

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"In the past six months, people were just leaving right and left", she said.

DePratto stressed he didn't see anything in the jobs report to deter Poloz from hiking the rate next week.

Health care added 25,200 jobs, nearly exactly in line with its average over the past year.

The +54,000 jog upwards in "educational and health services" employment was comprised of "educational services", +19,000; "health care", +25,000; and "social assistance", +10,000.

In its report July 6, the government revised up its estimate of job growth in May and April by a combined 37,000. With upward revisions to the data from the prior two months, the average gain over the last three months was 211,000.

"This is a good job-creation number, but on the other hand we see still continued soft wage growth", said Michael Feroli, chief USA economist at JPMorgan Chase.

While the sunny outlook led Federal Reserve officials last month to boost the number of interest-rate hikes they expect in 2018, an intensifying trade war threatens to sap economic momentum, and a shrinking pool of qualified workers may slow the pace of employment gains.

Manufacturers and services firms have said in recent surveys that their business is improving despite anxiety about the tariff showdown.

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