Job growth picked up last month and the U.S. unemployment rate fell to its lowest level since September 2001, the government reported yesterday, providing more evidence that the economy and labor market have settled into a fairly steady expansion.
Builders, health care providers, financial firms and other employers together added 146,000 workers to the nation's payrolls in June, up from a gain of 104,000 in May, the Labor Department reported.
The unemployment rate edged down to 5 percent, as the number of people who found jobs exceeded those who joined the search.
Employers have added an average of 181,000 workers a month this year, about the same pace as last year. This fit the view of many analysts that the economy is in good health, growing at around a 3.5 percent annual rate -- strong enough to boost employment without fueling higher inflation.
"June's [job] growth was solid," said Jared Bernstein, senior economist with the Economic Policy Institute, a think tank that focuses on labor issues. "The labor market is at a stage in the recovery when it can count on employers to continue creating jobs. . . . Most sectors are adding jobs on a monthly basis -- an important signal of widespread labor demand."
Stock prices climbed after the figures were released. And many analysts said the jobs report strengthened their expectations that the Federal Reserve will raise short-term interest rates again in August to keep inflation under control.
The evidence of labor market improvement was mixed, however, with several signs of continuing weakness.
The nation's service sector kept swelling, as retailers, hospitals, hotels, educators, architectural firms, temporary help providers and government were among the employers thant added jobs. The hot housing market accounted for, directly or indirectly, about a fourth of the net gain in jobs last month, according to an analysis by Merrill Lynch's Global Securities Research and Economics group.
But manufacturing employment continued its long-term decline. Manufacturers shed 24,000 jobs, for a fourth consecutive monthly decline. Most of those -- 18,000 -- reflected production cuts by automakers trying to reduce their bloated inventories. But makers of furniture, apparel, paper, machinery and metals also cut payrolls. Manufacturing jobs have fallen in 10 of the past 12 months.
The employment gains were unevenly distributed among the population. Black unemployment rose to 10.3 percent last month from 10.1 percent the month before -- more than double the overall rate -- while joblessness fell among whites to 4.3 percent from 4.4. percent. The unemployment rate for Latinos, who can be of any race, dropped to 5.8 percent from 6 percent.
And economists are divided over whether a 5 percent unemployment rate is very good or not good enough. It is well below the recent high of 6.3 percent touched in June 2003, when the economy was still recovering from the 2001 recession, but it is well above the recent low of 3.8 percent reached in April 2000, near the end of the 1990s economic boom.
Many economists say the low unemployment rate of 2000 was the result of unusual circumstances; under normal conditions, the rate cannot fall much below 5 percent for long without pushing inflation higher.
But others say the 5 percent rate understates the degree of weakness remaining in the labor market after the recession and initially sluggish recovery. One sign, they say, is the size of the labor force -- the number of people who have jobs or who are actively looking for work. This indicator typically grows as the population and economy expands; last month the size of the labor force was essentially unchanged.
The drop in the overall unemployment rate last month was "purely due to the weakness in labor force entry," said David Rosenberg, North American economist for Merrill Lynch's research group.
Even so, the pace of job growth "still indicates a tightening labor market," said Ian C. Shepherdson, chief U.S. economist of High Frequency Economics Ltd.
One positive sign was the decline in the share of the unemployed who have been out of a job for more than six months to 17.8 percent, the lowest level since April 2002. The number remains high by historical standards, Bernstein said, but it has fallen three months in a row, "suggesting the long-term unemployed are finally having an easier time finding jobs."
Average weekly wages for most workers rose in June by $1.01 to $541.22. This followed a 59-cent decline in May, the department reported yesterday, after revising its earlier figures.
After taking into account the impact of inflation, wages for production and non-managerial workers, who account for 80 percent of the workforce, were 0.6 percent lower in May than a year earlier.
"The relatively low unemployment rate has yet to translate into significantly higher wage gains," economists at Goldman Sachs U.S. Economics Research wrote in an analysis of the jobs report.