United States: Unemployment ticks up in June on greater participation in the labor market
U.S. non-farm payrolls expanded at a strong pace in June, reflecting the continued fundamental robustness of a U.S. economy which just logged its 93nd consecutive month of job creation, the longest streak on record. The economy added 213,000 jobs in June, which was slightly down from 244,000 new jobs in May (previously reported: +223,000) and ahead of market expectations of 195,000 jobs.
The job market expansion was largely broad-based, with employment gains recorded in the professional and business services, manufacturing and healthcare sectors, outweighing job losses in the retail trade sector. Despite the strong job creation, the unemployment rate increased to 4.0% in June from 3.8% in May, which was the lowest rate recorded since April 2000. June’s up-tick was partly because the participation rate rose to 62.9% in June from 62.7% in May.
Coinciding with higher unemployment in June was a marginal slowdown in wage growth, which ticked down to 2.7% from 2.8% in May. In month-on-month terms, average hourly earnings were up 0.2% in June, slightly below May’s 0.3% increase. The June wage data reflects the ongoing sweet spot for the U.S. economy: Wage growth is strong enough to signal that wage pressure remains robust, which can be seen as having a positive effect on domestic spending over the medium-term, but not enough to urge the Federal Reserve into ramping up its tightening of monetary policy ahead of schedule. A tightening labor market was one of the reasons the Fed hiked rates at its 12–13 June monetary policy meeting and it will no doubt closely monitor June’s developments and those in the coming months when considering future rate increases.