By guest author Ben Casselman, a writer on economics at the New York Times. He previously worked at the Wall Street Journal.
Hiring was robust after a weak May, suggesting that the economy is stronger than what some analysts had feared.
Employers added 224000 jobs in June, the Labour Department reported on Friday. Economists had expected a gain of about 170000.
The unemployment rate was 3.7 %, up from 3.6 % in May.
- Average earnings rose 6 cents an hour from May, and are up 3.1 % over the past year.
- Estimates of job growth in April and May were revised down slightly, by a combined 11000 jobs.
The job market rebounded last month after a dismal May, easing fears that the record-setting economic expansion could be running out of steam.
The June gain was stronger than economists had predicted, suggesting that trade tensions and cooling global growth have done little to sap the job market’s fundamental strength. Unemployment is near a five-decade low, wage growth is solid and employers have added jobs for 105 consecutive months, easily a record.
“There’s lots of talk about uncertainty, and maybe that’s going to lend itself to a weakening in hiring, but we haven’t actually seen it happen yet,” said Michelle Meyer, chief economist at Bank of America Merrill Lynch.
That resilience is good news for workers, who are benefiting from what is now, at least unofficially, the longest economic expansion on record. But, it could complicate the decision facing Federal Reserve policymakers, who are weighing whether to cut interest rates to forestall a downturn, a jolt of stimulus that investors were expecting.
Even with June’s healthy growth, there are signs the job market has cooled since last year. Employers have added an average of 171000 jobs per month over the past three months, down from 223,000 per month for all of 2018. Wage growth was disappointing in June, and has stalled in recent months.
The Longer Run
June marked the 10th anniversary of the official end of the Great Recession. And, unless a new recession has begun (something economists often don’t know for several months), the expansion is now the longest on record.
The recovery has been more remarkable for its durability than for its strength. Hiring has been slower than in many past rebounds, and wage growth has been anemic until recently. Only lately have the gains extended to black and Hispanic workers, the less-educated, and those facing discrimination or other barriers to employment.
The job market picked up last year, at least partly because of tax cuts and government spending increases that provided a short-term boost to economic growth. But, those effects are fading. Still, the expansion has repeatedly defied predictions that it was nearing an end.
“We have seen rapid declines like that in this recovery before,” said Martha Gimbel, an economist at the job-search site Indeed. “I think it’s really hard to figure out. Is this just another rapid decline that’s going to go away, or is this a decline we need to start worrying about?”
The Trade War’s Impact
Manufacturers added 17000 jobs in June, the most since January. That should allay concerns that Mr. Trump’s trade war is dragging down the broader economy. Data from the Institute for Supply Management this week showed that the industry’s struggles continued in June, although the decline wasn’t as severe as some economists had predicted.
Still, economists say they do not expect manufacturing to be the engine of growth that it was early in Mr. Trump’s term.
“Uncertainty remains very high for manufacturers and for companies with global exposure right now,” Ms. Meyer said. “They’re still producing to meet demand, but they’re not looking to exceed that. They’re being very cautious.”
At Taco Metals, a Miami-based manufacturer of equipment for the recreational marine industry, tariffs have meant higher costs for the raw materials and parts it imports from China and other countries. That has added to fears from boat builders and dealers about how long the good times can last in an industry that is highly sensitive to the broader economy.
“The tariffs just kind of forced people to think twice about is this going to continue,” said Bill Kushner, a vice president at the company. “There’s starting to be more hesitation on both the manufacturing side and the dealer side.”
As customers pull back, Mr. Kushner’s company, which employs about 150 workers in Florida and Tennessee, is doing the same. They are holding off on some equipment purchases and waiting to fill some positions.
“It’s just caused us to take a little step back and reassess some of the direction and make sure we’re not jumping the gun,” Mr. Kushner said. “It’s like, ‘Well, are we sure we’re going to need to do this, or should we try to outsource?’”
The View From Washington
Policymakers at the Federal Reserve will be examining the report closely as they weigh whether to take steps to bolster the economy.
Jerome H. Powell, the Fed chair, has resisted calls from Mr. Trump and other critics — and even from some Fed officials — to cut interest rates. But, he has signaled that he is prepared to act if the economy slows further. Investors have interpreted those comments to mean that the Fed will cut rates when it meets this month, although Mr. Powell has stopped short of promising to do so.
Friday’s (July 5, 2019) report contained mixed signals for policymakers. On the one hand, job growth was strong, suggesting companies remain confident enough to keep hiring even without the central bank’s assistance. But, many Fed officials will probably focus on the weakness in hourly earnings, which means wages are unlikely to put upward pressure on inflation.