The Labor Department reported that nonfarm payrolls increased by 287,000 positions in June, more than the 180,000 positions consensus projection. The small increase initially reported in May’s employment report of 38,000 was revised lower to only 11,000. Hiring in the second quarter averaged 147,000 a month, down from 196,000 in the first quarter and 229,000 in 2015. Employment rose in leisure and hospitality, health care, social assistance, financial services. The return to work of Verizon strikers also boosted jobs in information services. In June, health care employment rose by 39,000.
The unemployment rate rose 20 basis points to 4.9% in June from 4.7% in May. The unemployment rate is derived from a separate survey from the payroll employment number sited above. The number of unemployed persons increased by 347,000 to 7.8 million.
The wider measure of unemployment, the U-6 measure, edged down to 9.6% in June from 9.7% in May. This measure of unemployment includes those workers in part-time positions or who are too discouraged to look for work. At 2.0 million, the number of long-term unemployed (those unemployed for more than 27 weeks) changed little in June and accounted for 25.8% of the unemployed.
Average hourly earnings for all employees on private nonfarm payrolls increased by two cents to $25.61 in June, following an increase of six cents in May. Over the year, average hourly earnings have risen by 2.6%. This measure of wage growth is starting to rise. Average hourly earnings increased 2.3% in 2015 and 2.1% in 2014.
The report is encouraging with regard to the strength of the U.S. economy. Other recent data that also show relative strength in the economy include low levels of new claims for unemployment benefits, relatively strong consumer spending, and record-high levels of unfilled jobs (5.8 million positions available as of April, 2016). It is worth noting that the employment report reflects the condition of the U.S. job market as of mid-June and doesn’t account for any effects from the U.K. vote on June 23 to exit the European Union. At this point, it appears that the direct impact of Brexit on the U.S. economy will likely be modest. Nevertheless, it is likely that the Fed will not raise interest rates in the next several months as it waits to see what the full effect of Brexit may be on global markets and economies. Since Brexit, many analysts have shifted their view of an interest rate hike by the Federal Reserve to late this year or early in 2017 at the earliest. The Fed last raised its benchmark short-term interest rate in December after holding it near zero for seven years. Policy makers are scheduled to meet next July 26 and July 27. Other FOMC meetings are scheduled for September, early November, and mid-December.