By Jessica Menton -
U.S. employment rose by 223,000 jobs in June and the unemployment rate fell to 5.3 percent, the Labor Department said Thursday. The report was forecast to show employers adding 230,000 jobs last month and the unemployment rate was expected to tick down to 5.4 percent, according to analysts polled by Thomson Reuters.
The report comes after U.S. job growth rebounded sharply in April and May following a sharp hiring downturn in March.
Economists are seeing a favorable trend this year: high-end jobs in business and professional services continue to show growth, increasing by 64,000 in June, in line with the average monthly gain of 57,000 over the prior 12 months.
“We all know of the stories of people finishing college and ended up working for Starbucks (NASDAQ:SBUX) after the financial crisis. Now we’re finally seeing jobs for architects, engineers and computer scientists going up in the numbers,” said William Spriggs, chief economist at AFL-CIO.
This will help boost average wages because its means the economy is tipping towards adding jobs that are higher wage jobs, Spriggs said.
The U.S. had previously added at least 200,000 jobs per month for 12 consecutive months following February’s strong jobs report, a feat not seen in 20 years.
“One does presume that this is not an all you can eat jobs buffet,” said Mark Hamrick, Washington bureau chief at Bankrate.com. “At some point the economy essentially becomes satiated but we don’t think we’re there just yet simply because of lack of wage gains.”
The number of Americans who have been out of work for 27 weeks or longer was essentially unchanged last month, at 2.1 million, constituting 25.8 percent of the unemployed. The average hourly earnings for private-sector workers fell by 1 cent to $24.95. For most workers, however, real wages have fallen or remained flat for more than three decades.
Meanwhile, many Americans who work part-time jobs want to work full time, and nearly two-thirds who are able to work have dropped out of the labor force, the highest proportion opting out of the workforce since the 1970s. The labor-force participation rate was little changed at 62.6 percent, according to the report released Friday.
The participation rate still hovers near a 30-year low because improvements in the labor market are being offset by structural headwinds coming from demographics: baby boomers are retiring and young professionals are going back to school.
The precipitous drop in oil prices over the last 12 months, economists expect to continue to see job losses related to energy, such as the oil and mining sector because as investment in those areas declines, employment in those areas will decrease too.
Employment in mining fell for the sixth month in a row. Since a recent high in December 2014, employment in mining has declined by 71,000, with losses concentrated in support activities for mining.
However, information technology continues to see strong growth across the retail, insurance and enterprise space as companies upgrade their mobile infrastructure and software applications, said Sal DiFranco, executive vice president at recruiting firm DHR International. Experts are also seeing strong growth in the device and wearable market space, as well as engineering and sales positions.
“Some of the hottest regions right now for jobs are in Texas, Boston and obviously San Francisco with the technology hubs that are located there, but also surprisingly a lot of growth in Chicago and Washington D.C.,” DiFranco said.
A robust nonfarm payrolls report could provide further evidence the U.S. economy is on strong enough footing to absorb the impact of a Federal Reserve interest rate hike in September. The looming question now is how the economy further reduces an unemployment rate stuck at roughly 5.5 percent since earlier in the year.
“All the signs point to more strong jobs growth,” said Dan North, chief economist at Euler Hermes. “The unemployment rate may remain unchanged or even slightly tick up because there are more people coming back into the labor force, and that’s a strong sign.”
Most economists pushed back expectations the U.S. Federal Reserve would raise interest rates in June as a result of March’s disappointing jobs data, coupled with a sharp slowdown in economic growth in the first quarter.
“The general view is there will be a serious discussion about raising rates in September, unless a jobs report comes in way off base from what people are expecting to see,” said Tara Sinclair, chief economist at Indeed.com.
The increases, which would be the first in nearly a decade, have not yet come and interest rates remain at historic lows since the financial crisis in 2008.
Jessica Menton is a writer who covers business and the financial markets. News tips? Email me here. Follow me on Twitter (NYSE:TWTR) @JessicaMenton.
Unemployment Rate vs Labor Force Participation Rate | StartClass