U.S. jobs report shows room to run as trade war threatens gains

Gladys Abbott
July 9, 2018

Employers added 213,000 jobs to the US workforce in June, the Labor Department said in its jobs report Friday.

While the national unemployment rate fell to a 17-year-low at just 3.8% in May, those who are still trying to re-enter the workforce will have the toughest time in Missouri, Alaska and North Carolina, according to a new GOBankingRates.com report listing the best and worst states for unemployed job seekers.

Although average hourly wages grew 2.7% in June from a year ago, they didn't change much from May and came in below economists' expectations.

This means that the job market has tipped in the favor of workers, rather than employers.

The mixed signals of rising unemployment amid continued hiring could strike a flat note at the White House as President Donald Trump has repeatedly taken credit for the historic low levels of unemployment.

The June jobs report showed employers added 213,000 nonfarm payrolls, more than economists had expected. Economists surveyed by Bloomberg News had projected the unemployment rate would remain unchanged at 5.8 per cent, which matched the lowest on record. Professional and business services, manufacturing, health care, construction, and mining all added jobs in June. "It indicates that we have more labor market slack".

The labour force growth is likely to be welcomed by the Bank of Canada, which has been arguing that pockets of untapped market slack remain that could limit wage and price pressures.

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"The underlying fundamentals have been strong for quite some time and while we were a little surprised by the uptick in the unemployment rate, it appears to be caused by additional workers entering the labor force, which is a positive", Bedikian said.

Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said gains have averaged 215,000 month so far this year, up from 182,000 "more than strong enough to keep the unemployment rate trending down over time". Housing starts have climbed 11 percent so far this year.

Faster wage growth would have also indicated that inflation was building in the economy, which hasn't strongly been the case even though unemployment is low.

A CNBC panel called the report "great", "as good as it gets", and "steady as she goes". The labor force participation rate, or the number of people who are actively employed or looking for work, rose to 62.9% from 62.7%.

The report underscores a familiar refrain: There are lots of jobs being created, but not enough people to fill them.

"Together with signs that GDP growth rebounded markedly in the second quarter, that will keep the Fed on course to raise interest rates twice more by year-end". A year earlier, the unemployment rate was 4.3 percent, with 7 million people unemployed.

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