U.S. economy created 287,000 new jobs in June 2016, 100,000 more than forecasted
The U.S. labor market bounced back after a brief slump in May 2016, easing concerns about an extended slowdown in payroll growth after employers added 287,000 jobs in June 2016, as per the Bureau of Labor Statistics and as reported by Reuters on July 8th, 2016. The U.S. economy created 287,000 new jobs in June 2016, 100,000 more than economists had predicted, and the best monthly gain since October 2015. The June 2016 jobs data lifted the stock markets after May’s gloomy jobs report and the Brexit-related turmoil over the past few weeks that had cause a scare among investors. The unemployment rate rose to 4.9% from 4.7% as about 400,000 Americans came into the labor force, including discouraged workers who had stopped looking for jobs, according to the U.S. Department of Labor.
The rebound in employment gains helped dispel recession fears and underscored the U.S. economy’s strength that the country would weather the impact of headwinds at home and abroad. However, there are still enough uncertainties in the market related to Britain’s vote to exit the EU and sub-par global growth. On the other hand, the strong jobs data could strengthen the possibility of a Fed rate hike back on the table by the end of 2016, or after the presidential elections in December 2016.
The June 2016 non-farm payrolls surged on account of 35,000 Verizon workers who returned after a strike that had hurt May employment. Excluding the Verizon workforce, employment still rose by a robust 252,000. In June 2016, leisure and hospitality added 59,000 jobs; health care, 58,000; professional and business services, 38,000; retail, 30,000; Federal, state and local governments added 22,000; and financial activities, 16,000. The manufacturing sector added 14,000 jobs, signaling that the sector is stabilizing after a strong dollar, weak global economy, and oil industry downturn.
June’s job data also shows that the number of part-time workers who prefer full-time jobs fell by nearly 600,000. This in turn reduced a broader measure of joblessness to 9.6% from 9.7%. Moreover, the ranks of temporary workers increased by 15,000 after falling by 19,000 in May 2016. Despite June’s gains, monthly employment growth averaged 171,000 in the first half of 2016, compared to 229,000 last year and 251,000 in 2014. Economists attribute this to short-term temporary forces since a warmer winter led to a surge in hiring early in 2016, reducing the need to hire more workers in the later part of the year.
From a seemingly robust jobs data growth in June 2016, the Bureau of Labor Statistics trimmed down the job additions for April 2016 and May 2016 by a total of 6,000. Job additions in April 2016 were revised downwards to 144,000 from 123,000, and May’s to just 11,000 from 38,000. Average hourly wages inched up to $25.61 and are up 2.6% on a Y-o-Y basis.
Federal Reserve’s hiring tracker negative
Despite the creation of 287,000 new jobs in June 2016, a Federal Reserve index that tracks 19 labor-market indicators rose to -1.9 in June 2016 from -3.6 in May 2016, the sixth consecutive negative reading, according to the Federal Reserve Board’s data released on Monday, June 11th, 2016. The Fed index provides a deeper insight at hiring trends.
According to the Fed, a consecutive string of negative readings are typically seen before or during a recession, though there have been several instances in which the economy continued to grow. For example, in 1985, the labor market conditions index was negative for seven straight months. Despite this trend, the economic expansion that had begun at the end of 1982 had continued through the summer of 1990.
The stock markets rejoiced at the better-than-expected gains and the resulting rally nearly sent the S&P 500 index to a new closing high.
The S&P 500 rose 32.00 points, or 1.53%, to 2129.90, stopping just shy of its record closing high of 2130.82 set on May 21st, 2016. The Dow Jones industrial average jumped 251 points, or 1.4%, to 18,147 for its highest level since May 2015.