After a hugely disappointing May jobs report, the June jobs report has smashed expectations and should, at least temporarily, ease fears that U.S. job growth is slowing down for good.
On Friday morning, the Labor Department reported that the U.S. economy added 287,000 jobs, while the unemployment rate rose slightly, to 4.9 percent. Economists surveyed by The Wall Street Journal were expecting 165,000 jobs added. The rebound in hiring is a relief, as a third consecutive month of low readings would have all but confirmed an economic slowdown. In the report, the Labor Department wrote that the increases “largely offset declines in May and brought both measures back in line with levels that had prevailed from August 2015 to April.”
The May jobs report still remains an outlier and a bit of a mystery. While April’s number was recently revised up, from 123,000 to 144,000, the number of jobs added in May was revised down, from 38,000 to just 11,000. The Verizon strike was expected to lower the number of jobs (since workers on strike are not counted as employed), but the revised number is just a third of the original—which was already the smallest number of jobs added since 2010. This month’s revisions bring the three-month average to 147,000 jobs added per month.
There’s more good news in June’s jobs report, regarding wages. Average hourly earnings rose by two cents, to $25.61, following an eight-cent increase in April and a five-cent increase in May. In the past year, average hourly earnings have risen by 2.6 percent. The labor-force participation rate also recovered slightly—it’s now at 62.7 percent—after April and May wiped out gains from earlier this year. In March, that number reached its highest point in two years. But the decrease in the labor-force participation rate in the last two months signaled that the drop in the unemployment rate was likely because Americans were dropping out of the workforce, rather than being hired—meaning that the rise in the unemployment rate this month hopefully means that Americans are looking for work.
Next month’s jobs report will be closely watched, as it will be one indicator to look at to assess the impact of Brexit on the U.S. economy. While June’s numbers are undoubtedly positive, 2016’s overall underwhelming numbers—on average lower than the gains seen in 2015 and 2014—weren’t unexpected. Minutes from the Federal Reserve’s June meeting, released earlier this week, showed that Federal Open Markets Committee members voted not to raise interest rates due to uncertainty about the U.S. labor market (as a result of May’s surprisingly weak jobs report) and an agreement that the result of Britain’s coming departure from the European Union would require careful evaluation. However, some Fed members expressed that it would be reasonable to expect that employment increases “would soon moderate from the pace seen over the past few years” as the U.S. economy solidifies its gains and cools off a little.
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