US economy adds jobs and wages climb, but unemployment stays at 7.6%
WASHINGTON — U.S. employers are sending a message of confidence in the economy hiring more workers, raising pay and making the job market appear strong enough for the Federal Reserve to slow its bond purchases as early as September.
June’s 7.6% unemployment rate is derived from a survey of households, which found that 177,000 more people started looking for jobs last month. Most found them. The increase suggests that Americans think their job prospects have brightened.
But because some of the job seekers didn’t find work right away, the number of unemployed was largely unchanged at 11.8 million.
The 195,000 job gain for June is calculated from a separate survey of employers.
The percentage of Americans either working or actively looking for work rose for a second straight month to 63.5%. This is called the “labor force participation rate.” The participation rate has been generally declining since peaking at 67.3% in 2000. That’s partly the result of baby boomers retiring and leaving the workforce.
Employers added a robust 195,000 jobs in June and many more in April and May than previously thought. The unemployment rate remained 7.6 percent because more people started looking for jobs — a healthy sign — and some didn’t find them. The government doesn’t count people as unemployed unless they’re looking for work.
The Labor Department’s report Friday pointed to a job market that’s showing surprising resilience in the face of tax increases, federal spending cuts and economic weakness overseas. Employers have added an average 202,000 jobs for the past six months, up from 180,000 in the previous six.
June’s job gain was fueled by consumer spending and the housing recovery. Hiring was especially strong in June among retailers, hotels, restaurants, construction companies and financial services firms.
“The numbers that we’re seeing are more sustainable than we thought,” said Paul Edelstein, economist at IHS Global Insight. “We’re seeing better job numbers, the stock market is increasing and home prices are rising.”
Pay also rose sharply last month and is outpacing inflation. Average hourly pay rose 10 cents to $24.01. Over the past 12 months, it’s risen 2.2 percent. Over the same period, consumer prices have increased 1.4 percent.
Friday’s report showed that the U.S. economy added 70,000 more jobs in April and May than the government had previously estimated — 50,000 in April and 20,000 in May.
Further job growth could lower unemployment and help the economy rebound after a weak start this year. If so, the Fed would likely scale back its bond purchases later this year.
The Fed has been buying $85 billion in bonds each month since late last year. The purchases pushed long-term interest rates to historic lows and encouraged consumers and businesses to borrow and spend.
John Silvia, chief economist at Wells Fargo, said he thinks the Fed will announce at its September meeting that it will start reducing its bond purchases.
Friday’s report contained at least one element of concern: Many of the job gains were in generally lower-paying industries, a trend that emerged earlier this year. The hotels, restaurants and entertainment industry added 75,000 jobs in June. This industry has added an average 55,000 jobs a month this year, nearly double its average in 2012. Retailers added 37,000. Temporary jobs rose 10,000.
And many of the new jobs are only part time. The number of Americans who said they were working part time but would prefer full-time work jumped 322,000 to 8.2 million — the most in eight months.
Last month’s job growth came solely from the private sector, particularly services firms. Government jobs fell 7,000, mostly at the federal level. Some of that decline is due to budget cuts that kicked in March 1.
Solid hiring in the private sector is lifting wages, even in some lower-paying industries.
The overall gain in pay is “the standout feature of this report,” said Ryan Sweet, an economist at Moody’s Analytics. Low inflation rate is also helping consumers, he noted.
“The tide is continuing to turn for the consumer,” Sweet said. “The consumer is going to continue to be able to shoulder this recovery.”
Martin Crutsinger of the AP contributed to this report.