US jobs machine revs up, cutting unemployment to 6.1%

GMT 16:54 2014 Thursday ,03 July

Arab Today, arab today US jobs machine revs up, cutting unemployment to 6.1%

Job seekers
Washington - AFP

US job creation picked up solidly in June, pushing the jobless rate down to 6.1 percent, boosting confidence in the economy and sending stocks flying to new records.
Leaving behind the first-quarter contraction, the economy pumped out a much better-than-expected 288,000 net new jobs last month, Labor Department data showed Thursday.
The June numbers capped the best half-year for the US employment market since the 2008-2009 Great Recession: an average of  231,000 new positions added each  month since January.
That has helped pull the unemployment rate down much faster than predicted. At 6.1 percent, the rate was down 0.2 percentage points from May and 1.4 points from a year ago.
"In light of the recent volatility of GDP, we look to the employment report as the key barometer to measure the health of the economy," said Doug Handler, chief US economist at IHS Global Insight.
"This report puts a smile on the face of all economists who, like IHS, are forecasting strong economic growth in the second half of the year."
- Signal for early rate rise? -
The report sparked fresh buying in the US equity market, boosting the Dow Jones Industrial Average past the 17,000 mark for the first time in history.
In late-morning trade, the Dow was up 0.4 percent to 17,043.63 while the S&P 500 added 0.3 percent to a record intraday high of 1,981.98.
But the data also, for some analysts, moved forward expectations for the Federal Reserve's first interest rate hike since the recession. The Fed, concerned that growth is still weak and the jobs market still slack, has consistently pointed to mid-20015 at the earliest to lift its federal funds rate up from near-zero.
"We are firmly of the view that the Fed will have to raise rates much faster than they or the markets expect," said Ian Shepherdson at Pantheon Macroeconomics.
Indeed, bond prices fell and yields jumped as traders adjusted their medium-term expectations. The 10-year Treasury rose to 2.68 percent, up from 2.63 percent Wednesday and 2.52 percent Monday.
Jobs gains were broad-based across industries, with a surge as well in government hiring, a sector that has overall continued to pare jobs since the economic crisis.
There was a key exception to the gains. The construction industry lagged with only 6,000 new jobs, a poor showing for a sector expected to continue driving growth.
But that might not be for long: the ISM purchasing managers survey for June, also released Thursday, showed strong growth in construction sector activity that could lead to more hiring.
The total number of officially unemployed fell by more than 300,000 to 9.4 million, with only a slight uptick in the number of those not in the labor force, another sign of strength in the economy.
Another sign of strength was the continued fall in the number of long-term unemployed, a group that has particularly worried policy makers who fear they will forced to drop out of the work force permanently.
People out of work for more than 27 weeks fell by nearly 300,000 to 3.1 million, compared with 4.3 million a year ago.
But on the down side, the data also showed an increase in the number of those forced to work part-time because they cannot find full-time jobs.
In addition, the workforce participation rate remained at a low 62.8 percent, compared with 66 percent on the eve of the recession, a sign that the pace of hiring has not yet been strong enough to pull people who dropped out of the workforce back in.
Workers' hours were unchanged, and hourly wages continued to grow at a slow pace, up just 2.0 percent over a year.
That too has been a dovish signal for Federal Reserve policymakers, noted Shepherdson.
"The low rate of wage gains... is making it easy for the Fed to hold back the tide for now."
"But every business survey we know is screaming that wage gains are set to accelerate rapidly, and companies are already seeking higher prices in anticipation of higher costs. The Fed is in real danger of falling behind the inflation story."


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