In a sign that headwinds from the tariff battle are eclipsed by the strong economy, corporate hiring gathered momentum in June, and as a result, overall employment increased at a faster-than-expected pace. The market also witnessed an increase in average wages, though at a slower pace, which has triggered concerns of inflation pressure.
The uptick in hiring, coupled with last month’s robust manufacturing and construction activity, paints a rosy picture of the business sector and eases concerns over the increase in unemployment last month. The upbeat labor market, which has witnessed a decline in jobless claims in recent months, also adds to the case for stronger GDP growth in the second quarter.
According to data published by the Labor Department Friday, private firms in the US added 213,000 new jobs in June, much more than the number of jobs created in April and May and above economists’ estimate. The spurt in hiring was broad-based, with all major industries except the retail sector registering growth.
Private firms in the US added 213,000 new jobs in June, much more than the number of jobs created in April and May
During the month, more job seekers entered the market, lifting the overall unemployment rate to 4% from 3.8% in the preceding month, which was the lowest in nearly one-and-half years. The labor force participation rate moved up 0.2 percentage point month-on-month to 62.9%. There was a 0.2% sequential rise in average hourly earnings to $26.98, a tad slower than the 0.3% increase recorded in May.
Responding to the impressive job data, the Dow Jones Industrial Average gained 100 points, while the S&P 500 and Nasdaq composite rose 0.7% and 0.9%, respectively. Meanwhile, stock futures recovered from the losses they suffered after the additional tariffs slapped by the government on Chinese goods came into effect today.
Economists are of the view that the Federal Reserve would maintain the current schedule for monetary tightening, considering the muted wage growth and growing pressure on the job market from the rise in the number of job seekers.
Moreover, the potential downside risks from the trade sanctions warrant a less aggressive monetary policy in the near term. It is a fact that the uncertainty triggered by the tariff battle between Washington and its trade partners has dampened business confidence considerably. Since the current upward momentum is the result of the recent tax stimulus rolled out by the government, the trend could be sustained only if all the key components of the economy gather strength.