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U.S. Jobs Report: Gain of 224,000 in a June Rebound Strong Jobs Report Eases Fears of Damage From Trade War
(about 4 hours later)
Employers added 224,000 jobs in June, the Labor Department reported on Friday. Economists had expected a gain of about 170,000. A decade after the Great Recession released its grip on the American economy, the job market shows no sign of falling into another slump.
The unemployment rate was 3.7 percent, up from 3.6 percent in May. Weak hiring in May had given rise to fears that the long-running expansion was foundering in the face of trade tensions and cooling growth overseas. But job growth rebounded sharply in June, the Labor Department reported Friday: Employers added 224,000 jobs, a larger figure than expected. And manufacturers, who are bearing the brunt of President Trump’s trade war, added jobs at the fastest pace since January.
Average earnings rose 6 cents an hour from May, and are up 3.1 percent over the past year.
Estimates of job growth in April and May were revised down slightly, by a combined 11,000 jobs.
The job market rebounded last month after a dismal May, easing fears that the record-setting economic expansion could be running out of steam.
The June gain was stronger than economists had predicted, suggesting that trade tensions and cooling global growth have done little to sap the job market’s fundamental strength. Unemployment is near a five-decade low, wage growth is solid and employers have added jobs for 105 consecutive months, easily a record.
“There’s lots of talk about uncertainty, and maybe that’s going to lend itself to a weakening in hiring, but we haven’t actually seen it happen yet,” said Michelle Meyer, chief economist at Bank of America Merrill Lynch.“There’s lots of talk about uncertainty, and maybe that’s going to lend itself to a weakening in hiring, but we haven’t actually seen it happen yet,” said Michelle Meyer, chief economist at Bank of America Merrill Lynch.
That resilience is good news for workers, who are benefiting from what is now, at least unofficially, the longest economic expansion on record. And it is good news for President Trump, who is expected to make the strength of the economy a centerpiece of his re-election campaign. But it could complicate the decision facing Federal Reserve policymakers, who are weighing whether to cut interest rates to forestall a downturn, a jolt of stimulus that investors were expecting. The report was good news for Mr. Trump, who is expected to make the strength of the economy a centerpiece of his re-election campaign.
Even with June’s healthy growth, there are signs the job market has cooled since last year. Employers have added an average of 171,000 jobs per month over the past three months, down from 223,000 per month for all of 2018. Wage growth was disappointing in June, and has stalled in recent months. “Our country’s doing unbelievably well economically,” he told reporters Friday. At the same time, he reiterated his call for the Federal Reserve to cut interest rates, saying the effect on growth “would be like a rocket ship.”
Friday’s report might have been good news for the economy, but investors were less enthusiastic: Stocks fell slightly after the open of trading, with the S&P dropping 0.7 percent after trading commenced on Wall Street. Fed policymakers are expected to trim rates at their meeting this month, though the strength of the latest job figures makes it likely that the reduction will be modest. Stocks initially fell almost 1 percent Friday on the rate outlook, but the S&P 500 recovered to close down 0.2 percent.
Investors have been expecting the Federal Reserve to cut interest rates at its meeting at the end of the month, perhaps by as much as a half a percentage point. June’s strong job growth, however, may convince policymakers that such aggressive action is unnecessary. The job market has lost some momentum since last year, when tax cuts and increased government spending gave the economy a temporary lift. Employers have added an average of 171,000 jobs over the past three months, down from 223,000 per month last year. Wage growth, which picked up late last year, appears to have stalled again — average hourly earnings were up 3.1 percent in June from a year earlier, a pace that has barely budged in months. The unemployment rate rose slightly, although at 3.7 percent it remains near a multidecade low.
“That’s probably off the agenda,” said Ian Shepherdson, chief economist for Pantheon Macroeconomics, referring to the possibility of a half-point cut. Still, Friday’s figures were the latest evidence that the economy is gradually cooling, not headed for a deep freeze. Separate data from the Institute for Supply Management this week showed that both the manufacturing and services sectors grew in June by a variety of measures, though more slowly than in May. The housing market has shown signs of weakness, but that hasn’t yet discouraged consumers from spending money, perhaps because layoffs are near record lows.
A smaller, quarter-point cut remains likely, however. Many Fed officials will probably focus on the weakness in hourly earnings, which means wages are unlikely to put upward pressure on inflation.
On Friday, the market for Fed funds futures — where traders bet on the direction of the Fed’s key monetary policy target — continued to imply certainty that the central bank will cut rates at the July 30-31 meeting.
Jerome H. Powell, the Fed chair, has signaled that he is prepared to act if the economy slows further, but has stopped short of promising an imminent rate cut. Investors will be watching Mr. Powell’s testimony before Congress next week closely for any sign that his views have changed.
Mr. Trump on Friday continued to urge Mr. Powell to act, although he said the country was “doing unbelievably well economically” even without his help.
“I personally think the Fed should drop rates,” Mr. Trump told reporters, adding that the economy would be “a rocket ship” if the Fed did so.
June marked the 10th anniversary of the official end of the Great Recession. And unless a new recession has begun (something economists often don’t know for several months), the expansion is now the longest on record.
The recovery has been more remarkable for its durability than for its strength. Hiring has been slower than in many past rebounds, and wage growth has been anemic until recently. Only lately have the gains extended to black and Hispanic workers, the less-educated, and those facing discrimination or other barriers to employment.
The job market picked up last year, at least partly because of tax cuts and government spending increases that provided a short-term boost to economic growth. But those effects are fading.
“Everyone knew the pace was going to slow,” said Brett Ryan, an economist at Deutsche Bank. “The question is if it’s going to slow more sharply.”“Everyone knew the pace was going to slow,” said Brett Ryan, an economist at Deutsche Bank. “The question is if it’s going to slow more sharply.”
Still, the expansion has repeatedly defied predictions that it is nearing an end. Economic research has found that periods of economic growth do not simply peter out — some outside force has to cause them. That resilience is good news for workers, who are benefiting from what is now, at least unofficially, the longest economic expansion on record.
Some economists feared that Mr. Trump’s trade war could be the shove that pushed the United States into a recession. But there is little evidence of that. Manufacturers added 17,000 jobs in June, the most since January. Data from the Institute for Supply Management this week showed that the industry’s struggles continued in June, although the decline wasn’t as severe as some economists had predicted. The strength of the United States economy stands in stark contrast to weakness overseas. Data released Friday showed that German factory orders fell sharply in May, the latest sign of trouble in Europe’s largest economy. The European Central Bank is widely expected to take action to stimulate the economy when it meets later this month. China’s manufacturing sector has likewise been struggling, in part because of tariffs imposed by the United States.
In addition, the much larger service sector regained its footing in June after unexpected weakness in May. Retailers continued to shed jobs, but those cuts were more than offset by increased hiring by warehouses and trucking companies, which are benefiting from the rise of online shopping. Other consumer-driven industries also added jobs, a sign that consumers have not lost confidence in the economy’s strength. The conflicting signals being sent by the domestic and global economies are complicating the decision facing Fed policymakers as they weigh whether to cut interest rates at their meeting on July 30 and 31.
“Confidence is high, income growth is strong, layoffs are basically zero,” Mr. Shepherdson said. Investors had been expecting a cut, perhaps by as much as half a percentage point, but the strong jobs report could make such aggressive action less likely.
Still, economists say they don’t expect manufacturing to be the engine of growth that it was early in Mr. Trump’s term. “That’s probably off the agenda,” said Ian Shepherdson, chief economist for Pantheon Macroeconomics, referring to the possibility of a half-point cut.
A quarter-point cut is likely, however. Many Fed officials will probably focus on the weakness in hourly earnings, which means wages are unlikely to put upward pressure on inflation. And in its semiannual Monetary Policy Report, released on Friday, the Fed said it was seeing signs that “uncertainty surrounding trade policy could be leading firms to delay investment decisions and reduce capital expenditures.”
At Taco Metals, a Miami-based manufacturer of equipment for the recreational marine industry, tariffs have meant higher costs for the raw materials and parts it imports from China and other countries. That has added to fears from boat builders and dealers about how long the good times can last in an industry that is highly sensitive to the broader economy.At Taco Metals, a Miami-based manufacturer of equipment for the recreational marine industry, tariffs have meant higher costs for the raw materials and parts it imports from China and other countries. That has added to fears from boat builders and dealers about how long the good times can last in an industry that is highly sensitive to the broader economy.
“The tariffs just kind of forced people to think twice about is this going to continue,” said Bill Kushner, a vice president at the company. “There’s starting to be more hesitation on both the manufacturing side and the dealer side.”“The tariffs just kind of forced people to think twice about is this going to continue,” said Bill Kushner, a vice president at the company. “There’s starting to be more hesitation on both the manufacturing side and the dealer side.”
As customers pull back, Mr. Kushner’s company, which employs about 150 workers in Florida and Tennessee, is doing the same. They are holding off on some equipment purchases and waiting to fill some positions.As customers pull back, Mr. Kushner’s company, which employs about 150 workers in Florida and Tennessee, is doing the same. They are holding off on some equipment purchases and waiting to fill some positions.
“It’s just caused us to take a little step back and reassess some of the direction and make sure we’re not jumping the gun,” Mr. Kushner said. “It’s like, ‘Well, are we sure we’re going to need to do this, or should we try to outsource?’”“It’s just caused us to take a little step back and reassess some of the direction and make sure we’re not jumping the gun,” Mr. Kushner said. “It’s like, ‘Well, are we sure we’re going to need to do this, or should we try to outsource?’”
The unemployment rate ticked up to 3.7 percent in June, but don’t read too much into that — the rate often bounces around from one month to the next, and it remains near a five-decade low. And the labor force grew by 335,000 people, a sign that the strong job market is drawing workers off the sidelines. So far, however, there is little evidence that those concerns are spreading beyond manufacturing to the broader economy. Hiring in the much larger services sector bounced back in June after unexpected weakness in May, and consumer confidence remains high. Tariffs were barely a topic of conversation at a big gathering of internet retailers in Chicago last week, said Jason Guggisberg, vice president for national accounts for Adecco, a staffing company.
With workers scarce, companies are finding they must work harder to fill even entry-level jobs, said Jason Guggisberg, vice president for national accounts for Adecco, a staffing firm. He said his clients, which include warehouse and logistics companies, were dropping educational requirements, training workers who lack experience and easing up on drug testing. And they are learning to move quickly to fill jobs. “They’re very optimistic about a very great second half of this year,” he said. “They’re going to ride this economic wave as long as they can.”
“Right now it is really about speed,” he said. “When you’re ready to hire, you’ve got to hire. Because in 48 hours those people may not be there.” June marked the 10th anniversary of the official end of the Great Recession. Unless a recession has already begun (something economists often don’t know for several months), the current expansion is the longest on record.
The best way to attract workers, however, is still to raise pay. And Mr. Guggisberg said companies are reluctant to do so. Perhaps inevitably, that milestone has prompted questions about when the good times will end. But while economists say a recession is inevitable, research has found that periods of economic growth do not simply peter out — some outside force has to cause them.
“We don’t see any signs of a major wage increases,” he said. The streak has been more remarkable for its durability than for its strength. Hiring has been slower than in many past recoveries, and wage growth has been anemic through much of the decade. Only recently have the economic gains filtered down to black and Hispanic workers, those with less education, and others who face discrimination or other barriers to employment.
Matt Phillips contributed reporting. “A slowdown is worrisome because you do still have these groups and these workers who have not fully benefited by the recovery,” said Martha Gimbel, an economist at the job-search site Indeed. “For a lot of people, just not going into a recession may not be good enough.”
Most recently, companies have spread the economic benefits by turning to new sources of talent. Mr. Guggisberg said his clients, which include warehouse and logistics companies, were dropping educational requirements, training workers who lack experience and easing up on drug testing.
Pool Scouts, a Virginia-based pool maintenance and repair company, is experiencing the challenge firsthand. Even after raising pay, the company’s franchisees have seen higher turnover this year for hourly workers, who typically earn $12 to $18 an hour. And when they need to replace people, hiring can be a struggle.
“We’re seeing much higher no-show rates” for job interviews, said Kevin Wilson, chief executive of Pool Scouts’ parent company, Buzz Franchise Brands. “We’re going to interview you, we set up a time for you to come in, and you just don’t show.”
For Mr. Wilson’s company, which also owns franchise businesses for swim lessons and home cleaning, the strong economy is creating a problem that may be less obvious: People have become reluctant to become franchisees, because they have steady jobs and don’t need to take the risk of striking out on their own.
“We’re having a lot of people go through the process and then say, ‘You know, I’ve got it pretty good at my job, I just got a raise,’” Mr. Wilson said. “There’s just not that incentive there anymore to make the jump, as opposed to the economy we had two, three, four years ago.”
Matt Phillips and Jeanna Smialek contributed reporting.