At least 432,000 people dropped out of the labour force, pushing the unemployment rate two-tenths of a percentage point lower to 5.3%, the lowest since April 2008.
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The result is that the proportion of Americans working or looking for work fell to a 38-year low. Economists predict that employers added 233,000 jobs and that the unemployment rate dipped to 5.4 percent from 5.5 percent in May, according to data firm FactSet. Despite the rise in the jobless rate, the region added 2,211 jobs.
The figures capture the persistently uneven nature of the job market’s recovery from the Great Recession. Average hourly earnings increased 2.0 per cent in the 12 months through June, decelerating from 2.3 per cent in May.
The data presented by the government also suggests that employers may not be experiencing the need to raise wages to retain and attract qualified workers and possibly there are more people available for work than what is indicated by the unemployment rate. That means the survey week last month ended on Saturday, June 13. Those receiving bi-monthly pay checks won’t get them until 15th and this in turn distorts the wage readings when the survey weeks come in early. “This is about the pace of entry largely in the workforce”, United States Labor Department Secretary Tom Perez said on CNBC’s “Squawk on the Street” on Thursday. “There’s still significant slack”.
Before the report, interest rate futures were pricing in a more than 50 per cent chance of a December hike, but bets shifted to early 2016.
“We believe this report keeps the Fed on track for tightening at the September meeting, but there will be two more employment reports between now and then”, said Mr Jim O’Sullivan of High Frequency economics.
Some quirks of the jobs report might also explain why wages stagnated last month.
It remains to be determined whether the US economy has gained enough momentum to make up for the increase in borrowing costs, which are expected to be moving upward for consumers looking to purchase high value items.
“Expanding job opportunities throughout the economy make it increasingly hard for contractors to find experienced construction workers”, association chief economist Ken Simonson said.
Manufacturing gained just 4,000 jobs in June.
Among other sectors, professional and business services added 64,000 jobs; health care, 53,000; retailers, 33,000; leisure and hospitality, 22,000; and transportation and warehousing, 17,000.
The ratio of payroll increase in June rose nearly to the average in the first half of this year.
Patrick Cimerola, senior vice president of human resources at Choice Hotels, the corporate parent of such chains as Quality Suites and Comfort Inn, said the company is raising pay and adding perks to hire workers in marketing, information technology and finance.
Yet, that gain came more from people dropping out of the jobs market than from new hiring by companies and governments. “We continue to look for the first rate hike in September”.
Yet Americans are finally spending more after boosting their savings earlier this year, in part because they’re growing more confident about the economy.
That’s good news for auto dealers and real estate agents.
Auto sales and home sales have jumped to their highest levels since 2007.
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At the same time, wages have stalled, rising just 2 percent over the past 12 months.
