Unemployment Rate Rises To 4%; US Economy Adds 213000 Jobs

Unemployment Rate Rises To 4%; US Economy Adds 213000 Jobs

Employment in the world's largest economy continued its brisk pace in June but the unemployment rate jumped as more people joined the job hunt, according to a government report on Friday (Jul 7). Manufacturing added a healthy 36,000 jobs in June.

The U.S. economy just keeps cranking out jobs.

The unemployment rate ticked up slightly to 4 percent as some people who had been on the sidelines moved back into the labor force.

The bottom line is that the buoyancy in June's USA labor market statistics will reaffirm the Federal Reserve's view that the economy is doing super-well at present and that further interest rate hikes will be justified.

Of interest? Despite the overwhelmingly positive performance of the labor market last month, there was no boasting from the White House in response to the release of the jobs report on Friday morning.

"Overall, this "not too hot, not too cold" report supports our call for four Fed rate hikes in total this year", Gregory Daco, head of U.S. macroeconomics at Oxford Economics in NY, said in a note.

Michael Gapen, chief United States economist at Barclays Plc in NY and a former Fed official, said that the boost in workers coming into the labour market bodes well for pushing down the unemployment rate again. "A disappointing number would not be a sign of weakness, other than in labor supply".

The lack of wage growth is disappointing, but still higher than the rate of inflation, said Douglas Holtz-Eakin, president of the American Action Forum. And companies have been offering more benefits to attract and retain their workers. Average hourly earnings are forecast rising 0.3 percent in June after a similar increase in May.

The Labor Department said that average hourly earnings rose five cents, or 0.2% in June after increasing 0.3% in May. The increase is above the gains required for the accommodation of the population growth and about 20,000 more compared to last year's average during the same period.

The Fed's preferred inflation measure hit the central bank's 2 percent target in May for the first time in six years and is expected to remain high, in part due to the tightening job market.

Matthieu Arseneau, deputy chief economist for the National Bank, said that since the start of 2018 total employment has registered a decline of 48,000 private-sector jobs.

The Trump administration has also applied tariffs on steel and aluminum from allies like Canada and Mexico and has threatened to abandon the North American Free Trade Agreement with those two countries.

On Friday, the world witnessed the imposition of new tariffs by the USA and China on goods worth $34bn from each of the two countries.

The concern is that a tit-for-tat escalation of tariffs will be increasingly damaging for activity, hurting sentiment and leading to a slower pace of growth in capital expenditure and job creation.

For employers, however, a hot job market is costly.

Education and health care led the gains with 54,000.

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