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US jobs machine revs up, cutting unemployment to 6.1%

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(Globalpost/GlobalPost)

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 point from May and 1.4 points from a year ago.

"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," said Doug Handler, chief US economist at IHS Global Insight.

President Barack Obama, who came into office in the depth of the recession that saw millions laid off, said the gains attested to the strength of the recovery.

"It gives you a sense that the economy has built momentum, that we are making progress. We've now seen almost 10 million jobs created over the course of the last 52 months," he said.

But Obama prodded Congress to back his initiatives including infrastructure development and raising the minimum wage to do more for the millions still struggling.

"We have not seen more consistent job growth since the '90s. But we can make even more progress if Congress is willing to work with my administration and to set politics aside, at least occasionally."

- Early rate rise signal? -

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 holiday-shortened trade, the Dow finished up 0.54 percent at a record 17,068.26 while the S&P 500 added 0.55 percent to a fresh high of 1,985.44.

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 yields jumped as traders adjusted their medium-term expectations.

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.

The number of long-term unemployed continued to fall, a good sign amid worries that those jobless for more than 27 weeks will be forced to drop out of the work force permanently.

But on the down side, the data also showed an increase in the number of part-time workers. But the largest part of that gain was from those working part-time by choice.

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 policy makers, 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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http://www.globalpost.com/dispatch/news/afp/140703/us-jobs-machine-revs-cutting-unemployment-61-0