Home NewsEconomy News U.S. labor market powers ahead with strong job gains despite recession fears By Reuters

U.S. labor market powers ahead with strong job gains despite recession fears By Reuters

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U.S. labor market powers ahead with strong job gains despite recession fears By Reuters


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© Reuters. FILE PHOTO: The Federal Reserve Building on Constitution Avenue in Washington, U.S., March 19, 2019. REUTERS/Leah Millis

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Lucia Muticani

WASHINGTON (Reuters) – U.S. employers hired far more workers than expected in June and continued to raise wages steadily, in signs of continued strength in the labor market, giving the Federal Reserve justification for another 75 basis point hike in interest rates this month.

The Labor Department’s closely watched employment report on Friday also failed to show that companies were reducing workers’ hours. The number of people working part-time for financial reasons fell to the lowest level in nearly 21 years.

Strong job growth eased fears of an impending recession and raised hopes that any recession will be mild.

“If you look in this report for signs that we’re already in a recession, you’re probably going to get lost,” said Nick Bunker, an economist at Indeed in Washington. “Currently, employers continue to hire large numbers of workers at higher wages. That’s something to celebrate.”

Nonfarm payrolls rose by 372,000 last month, the survey of agencies showed. It was the fourth straight month that more than 350,000 jobs were added, bringing employment below the pre-pandemic level of 524,000. The private sector has made up for all jobs lost during the COVID-19 pandemic, with employment up 140,000 from February 2020. Government employment remained at 664,000.

Economists polled by Reuters had forecast a gain of 268,000 jobs, with estimates ranging from as low as 90,000 to as high as 400,000. The broad growth in June was led by the professional and business services industries, which added 74,000 jobs. Employment in leisure and hospitality increased by 67,000. But the sector has still lost 1.3 million jobs since February 2020.

There were also strong job gains in healthcare, information, and transportation and warehousing. Manufacturing added 29,000 jobs and made up for all the jobs lost during the pandemic. Construction employment rose by 13,000.

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

“No country is better equipped to lower inflation than the United States without giving up all the economic gains we’ve made over the past 18 months,” Biden said in a statement.

Stocks fell on Wall Street. The dollar fell against a basket of currencies. U.S. Treasury yields rose.

A different recession Despite a contraction in GDP in the January-March quarter, the labor market remains strong. A slew of tepid reports from consumer spending to housing and manufacturing in May left most economists expecting another drop in GDP in the second quarter.

However, a contraction in GDP for the second consecutive quarter does not mean a recession due to a tight labor market.

“But if the U.S. economy is entering or is about to enter a recession, it will be a recession very different from other historic recessions,” said Noah Williams, an adjunct fellow at the Manhattan Institute.

“The main feature of a recession is a decline in employment, which usually begins with a slowdown in business hiring. This slowdown has not yet occurred on a large scale.”

The Fed wants to cool labor demand to help reduce inflation to its 2% target. The Fed raised its benchmark overnight interest rate by three-quarters of a percentage point in June, the largest increase since 1994. The Fed, which has raised policy rates by 150 basis points since March, is widely expected to announce another 75 basis points. – A rate hike at a meeting later this month.

Inflation data for June, due next Wednesday, is expected to show an acceleration in consumer prices, giving policymakers more reassurance to further raise borrowing costs.

Average hourly earnings rose 0.3% in June, following a 0.4% gain in May. This slowed year-on-year growth to 5.1% from 5.3% in May. Despite the slowdown, wage pressures remained strong, with average hourly earnings for production workers rising by 0.5%. A year-on-year increase of 6.4%.

With 11.3 million job openings at the end of May and nearly two positions for every unemployed person, wages will continue to rise.

The average workweek was steady at 34.5 hours. The details of the household surveys that yielded the unemployment rate were mixed. The unemployment rate remained at 3.6% for the fourth straight month, with 353,000 people leaving the labor force, nearly half of them women. As a result, the labor force participation rate, or the proportion of working-age Americans who have a job or are looking for work, edged down to 62.2% from 62.3% in May.

Household employment fell by 315,000. 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 the unemployment rate fell to 6.7%, which includes people who want to work but have given up looking for work and those who work part-time because they can’t find a full-time job. This was the lowest level since the government began tracking the series in 1994, down from 7.1% in May.

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