United States: June jobs report calms market jitters
July 8, 2016
Markets, and likely the Federal Reserve, breathed a sigh of relief after the June jobs report showed a strong increase in employment and thus eased concerns that the U.S. economy might have lost steam. Non-farm payrolls surged by 287,000 in June, which came in well above the downwardly-revised increase of 11,000 in May (previously reported: +38,000) and fared better than the 180,000 new jobs the market had expected. The dismal jobs result in May was, together with uncertainty regarding the UK’s Brexit vote on 23 June, a key driver behind the Federal Reserve’s delay of an interest-rate increase at its latest meeting in June.
The details of the June report are even more encouraging. The private sector added 265,000 new jobs and therefore more than recovered the 6,000 jobs that were destroyed in May. Meanwhile, the public sector added an additional 22,000 jobs, which continues to contribute to the strengthening of the U.S. labor market. Some analysts suggest that the pick-up in employment in June reflected, in part, the end of the Verizon Communications workers strike, which alone accounted for 40,000 of the monthly improvement. In addition, analysts see that, beyond Verizon, other labor data look encouraging.
The unemployment rate, which is derived from a different survey, rose from May’s 4.7% to 4.9% in June, as the labor participation rose from 62.6% in May to 62.7% in June.
In the view of the majority of analysts, the positive June jobs report will keep the Federal Reserve on track to raise interest rates at some point later in the year.
Author: Ricardo Aceves, Senior Economist