Published: Sat, July 06, 2019
Markets | By Otis Pena

United States labour market booms in June

United States labour market booms in June

On Friday, the Labor Department said nonfarm employers added 224,000 jobs last month - the most in five months, and not the kind of labor market that would normally cause the US central bank to cut interest rates.

The Fed at its last meeting in June had signalled that it was prepared to start cutting interest rates if needed to protect the USA economy, a change from the pledge it had been making since January to remain "patient" before changing rates.

The defensive sectors - real estate, utilities and consumer staples - fell between 0.6% and 0.8% as a rise in U.S. Treasury yields made the dividend-paying companies less appealing.

The number substantially beat the expectations of analysts, who had forecast a drag on jobs because of business uncertainty around high trade tensions as well as a lackluster housing market.

The unemployment rate was little changed at 3.7%, the U.S. Bureau of Labor Statistics reported Friday.

Stocks fell from all-time highs on Friday after the release of stronger jobs data dampened hope for easier Federal Reserve monetary policy. Stocks on Wall Street slipped.

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Fed Chairman Jerome Powell's semi-annual testimony to the U.S. Congress on the economy next week could shed light on the near-term outlook for monetary policy.

Buoyed by a strong job market and steady growth, Powell stepped into his role in 2017 pledging to slowly bring interest rates back up from historically low levels, where they've languished since the Great Recession a decade ago.

"There is no inflationary pressure coming from the labor side", said Sung Won Sohn, an economics professor at Loyola Marymount University in Los Angeles. Markets still see a rate cut this month as a near-certainty, though they largely priced out chances for an aggressive half-percentage-point cut. The weakness in retail persisted with a fifth straight drop in employment.

The participation rate, or share of working-age people in the labour force, increased to 62.9% following 62.8% as steady wage gains pulled more Americans from the sidelines and into the workforce. Manufacturers hired 17,000, up from just 3,000 in May. On the goods side of the economy, construction employment led the way in June with 21,000 jobs added. Government payrolls rebounded by 33,000, the most since August 2018, after shedding 11,000 jobs in May.

But leisure and hospitality sector payrolls increased by a moderate 8,000 in June after rising 18,000 in the prior month. Gains in professional services, education and health services led the way in the sector, contributing more than two-thirds of the job growth during the month. But with June's pace of hiring, employers have now added, on average, a solid 171,000 jobs for the past three months.

Transportation and warehousing added 24,000 jobs over the month and 158,000 over the past 12 months.

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