The US labor market is continuing with strong employment growth despite fears of a recession

  • Non-farm payrolls increase by 372,000 in June
  • Private sector employment back above pre-pandemic levels
  • Unemployment rate remains stable at 3.6%
  • The average hourly wage increases by 0.3%; 5.1% more than in the previous year

WASHINGTON, July 8 (Reuters) – US employers hired far more workers than expected in June and continued to steadily hike wages, signs of continued labor market strength that are giving the Federal Reserve ammunition for another 75 basis point interest rate hike this month.

The Labor Department’s closely watched jobs report on Friday also showed no evidence of companies reducing working hours for workers. The number of people working part-time for economic reasons has fallen to its lowest level in almost 21 years.

Strong job growth allayed fears of an impending recession and gave hope that any downturn would be mild.

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“If you scan this report for signs that we’re already in a recession, you’re likely to get nothing,” said Nick Bunker, an economist at Indeed in Washington. “At the moment, employers continue to hire a significant number of workers at higher wages. That is something to celebrate.”

The survey of farms showed that non-farm payrolls increased by 372,000 jobs in the last month. It was the fourth consecutive month that more than 350,000 jobs were added and employment fell 524,000 jobs below pre-pandemic levels. The private sector has regained all jobs lost during the COVID-19 pandemic and employment is up 140,000 from February 2020. State employment remains in the hole by 664,000.

Economists polled by Reuters had forecast 268,000 additional jobs, with estimates ranging from 90,000 to 400,000. The broad surge in June was led by the professional and business services industry, which added 74,000 jobs. The number of people employed in the leisure and hospitality sector increased by 67,000 jobs. However, employment in the sector has fallen by 1.3 million since February 2020.

There have also been strong wage increases in healthcare, information, and transportation and warehousing. Manufacturing has added 29,000 jobs and regained all the jobs lost during the pandemic. The number of people employed in the construction industry increased by 13,000 jobs.

The economy created 2.74 million jobs in the first half of the year. President Joe Biden welcomed the strong job gains.

“No country is better positioned than America to bring down inflation without giving up all of the economic gains we’ve made over the past 18 months,” Biden said in a statement.

Wall Street stocks fell. The dollar slipped against a basket of currencies. US Treasury yields rose.

ANOTHER RECESSION The labor market is strong despite the contraction in gross domestic product in the January-March quarter. A series of tepid reports ranging from consumer spending in May to housing and manufacturing led most economists to expect GDP to fall again in the second quarter.

However, with the labor market tight, a second straight decline in quarterly GDP would not mean a recession.

“But if the US economy is in or about to enter a recession, it would be a very different type of recession than other historical downturns,” said Noah Williams, adjunct fellow at the Manhattan Institute.

“Recessions have largely been marked by declines in employment, which typically began with a slowdown in business hiring. Such a slowdown has yet to happen on a broad scale.”

The Fed wants to dampen labor demand to bring inflation down to its 2% target. The US Federal Reserve raised its benchmark federal funds rate by three-quarters of a percentage point in June, the largest hike since 1994. Markets overwhelmingly expect the Fed, which has raised its benchmark interest rate by 150 basis points since March, to announce a further 75-basis point hike at its meeting later this month.

June inflation data next Wednesday, which is expected to show an acceleration in consumer prices, is also expected to give policymakers more cover to further raise borrowing costs.

Average hourly earnings rose 0.3% in June after rising 0.4% in May. As a result, the annual increase fell to 5.1% from 5.3% in May. Despite the slowdown, wage pressures remain resilient, with average hourly wages for manufacturing workers rising a solid 0.5%. They increased by 6.4% year-on-year.

With 11.3 million job vacancies at the end of May and almost two jobs for every unemployed person, wages will continue to rise. Continue reading

The average work week remained constant at 34.5 hours. The information on the household survey, from which unemployment is derived, was mixed. The unemployment rate remained unchanged at 3.6% for the fourth straight month as 353,000 people left the labor market, almost half of them women. As a result, the employment rate, or the proportion of working-age Americans who have or are looking for a job, fell to 62.2% from 62.3% in May.

Household employment fell by 315,000 jobs. But the number of people working part-time for economic reasons fell by 707,000 to 3.6 million, the lowest level since August 2001.

A broader measure of unemployment, which includes people who want to work but have given up looking and people who work part-time because they can’t find full-time employment, fell to 6.7%. That was the lowest since the government began tracking data series in 1994, and down from 7.1% in May.

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Reporting by Lucia Mutikani Editing by Chizu Nomiyama

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