The U.S. economy added 195,000 jobs in June, continuing a trend of steady growth as private hiring across a broad spectrum of industries offset declines in government and manufacturing employment.
While not enough to push down the 7.6 percent unemployment rate, the number beat analysts’ forecasts and stoked expectations that the Federal Reserve will begin reducing its support for U.S. financial markets this fall.
The composition of job gains and losses reflected both what appears to be a durable U.S. recovery and weaker demand for U.S. goods in places such as Europe, which is still in the midst of a recession, and China, where growth has begun to slow.
U.S. exports have been disappointingly flat in recent months and have become a drag on the manufacturing sector, but domestic spending has helped to spur job growth in areas such as retail.
“It is consistent with what we have seen in consumer confidence increasing and households feeling in a stronger position to spend,” said Alan Krueger, chairman of the Council of Economic Advisers. Krueger said that despite the overall decline in manufacturing, hiring in some industries, such as autos, remained strong; and there is hope that as the housing sector strengthens, it will boost demand for appliances, furniture, building materials and other manufactured goods.
The monthly jobs report is considered among the most important barometers of the economy. It is taking on additional importance now because of its influence on when the Fed will begin to reduce the monthly asset purchases with which it has been supporting the U.S. economy — a key issue in the debate over domestic and global economic policy. The Fed has tied the end of its asset purchases to progress on reducing joblessness.
Interest rates on U.S. Treasury bonds headed higher after Friday’s report as investors continued to bet that the Fed will follow through on its “tapering” plans and reduce asset purchases in coming months. Declining demand for financial assets such as Treasury bonds increases the interest rate that the seller must offer and drives down the price.
Stock investors, on the contrary, were buoyed by the evidence of steady economic growth. Major U.S. stock markets were higher through the day and closed up about 1 percent.
Officials and analysts across the spectrum agreed the report was a positive one: Both House Speaker John A. Boehner (R-Ohio) and the more liberal Economic Policy Institute referred to it as “good news.”
One positive development: The labor participation rate remained steady at 63.5 percent and has remained roughly constant for about a year now after a period when unemployed workers were becoming discouraged and ending active job hunts. Along with the healthy addition of jobs in June, the Labor Department revised its previous employment estimates for April and May upward by 70,000 jobs.
But joblessness remains high. There are 11.8 million people out of work — 4.3 million of whom have been without a job for more than half a year — and another 8.2 million working part time because they cannot find full-time jobs, an increase of more than 320,000 from May. Overall, the number of people with full-time jobs remains 2.5 million below the peak it hit in November 2007.
“We are still in second gear, not at highway speed” on job creation, EPI economist Heidi Shierholz wrote in an analysis of the latest employment report. At current rates of job creation, she estimated it would still be “more than five years” before the United States returns to its pre-crisis level of 4.7 percent unemployment.
Some analysts argue that the changing nature of the global economy, a rise in the underlying unemployment rates in the industrialized world and other factors may put that level of unemployment out of reach for an even longer period.
Still, the report showed a labor market growing despite the drag of sequester-related government spending reductions. Since those spending cuts took effect, analysts have tried to judge the impact they would have on the economy. While the number of federal government jobs fell by 5,000, strong hiring throughout the service trades offset it, such as 75,000 new jobs in leisure and hospitality businesses.
But sector by sector, the news was not all good.
Manufacturing employment fell by 6,000 jobs and remains about 1.8 million below the level it reached in 2007.
The construction sector added 13,000 jobs. But its recovery has also been sluggish. Since late 2009, the economy has added just 162,000 construction jobs, and the industry remains more than 20 percent below its 2007 peak of about 7.5 million jobs.
Few industries have fully rebounded from the crash that was triggered by the collapse of the housing industry and subsequent failure of the Lehman Brothers investment bank.
The notable exceptions are in the services sector, which, with around 93.6 million jobs, is now about 800,000 above where it was in 2007. Within that broad category, professional and business services companies have added half a million jobs, while leisure and hospitality companies employ about 700,000 more than they did previously. Health and education companies, which continued adding jobs through the recession, currently employ 1.1 million more people than they did in 2007.
Among “goods-producing” industries — the broad economic category that includes manufacturing — oil and gas extraction and mining are both now employing more people than at the onset of the crisis in 2007.