June jobs report shows recovery is accelerating

A surprisingly robust job market is energizing the 5-year-old U.S. recovery and driving the economy closer to full health.
AP Wire
Jul 6, 2014

Employers added 288,000 jobs in June and helped cut the unemployment rate to 6.1 percent, the lowest since 2008. It was the fifth straight gain above 200,000 — the best such stretch since the late 1990s tech boom.

The stock market signaled its approval. The Dow Jones industrial average surged 92 points to top 17,000 for the first time.

The breadth and consistency of the job growth are striking in part because of how poorly the year began. The economy shrank at a steep 2.9 percent annual rate in the January-March quarter as a harsh winter contributed to the sharpest contraction since the depths of the recession.

Yet employers have shrugged off that setback. They've kept hiring.

The unemployment rate dipped from 6.3 percent in May to its lowest level since the financial crisis struck with full force in the fall of 2008, when the Wall Street firm Lehman Brothers went bankrupt.

"This has now become a textbook jobs expansion," said Patrick O'Keefe, director of economic research at the consultancy CohnReznick. "It is both broad and accelerating."

At least one nagging doubt is dampening the enthusiasm: Can the stepped-up hiring lead to higher incomes? Wages have yet to outpace inflation for most workers. Eventually, analysts say, the falling unemployment rate should cause pay to rise more sharply. But no one knows precisely when.

The jobs report did make clear that, five years after the recession officially ended, the U.S. economy is showing more vitality even as major economies in Europe and Asia continue to struggle.

Last month's solid hiring followed gains of 217,000 jobs in May and 304,000 in April, figures that were revised upward by a combined 29,000.

Over the past 12 months, the economy has added nearly 2.5 million jobs — an average of 208,000 a month, the fastest year-over-year pace since 2006.

Economists say the steady U.S. hiring should fuel more purchases of goods from Asia and Europe and strengthen those economies at least slightly. Much of Europe is suffering from high unemployment. And China is trying to moderate its economy's growth without slowing it too much.

"If we have some momentum going into the second half of the year, it helps the world economy because we're big consumers," said Stuart Hoffman, chief economist at PNC Financial Services.

The U.S. job gains in June were widespread. Factories added 16,000 workers, retailers 40,200. Financial and insurance firms increased their payrolls by 17,000. Restaurants and bars employed 32,800 more people. Only construction, which gained a mere 6,000, reflected the slow recovery of previous years.

Local governments added 18,000 education workers. But that might have been a quirk: Many schools that had been closed for snow days stayed open longer than usual in June, said Diane Swonk, chief economist at Mesirow Financial in Chicago.

Over the past three months, job growth has averaged a healthy 272,000. And in May, the economy surpassed the jobs total from December 2007, when the Great Recession officially began.

Researchers at the liberal Economic Policy Institute estimate that 6.7 million more jobs would have been needed to keep up with U.S. population growth.

One key challenge is whether the job gains will pull more Americans back into the workforce. Many people who lost jobs during the recession and were never rehired have stopped looking for work. Just 62.8 percent of American adults are working or are looking for a job, compared with 66 percent before the downturn.

The number of long-term unemployed has dropped 1.2 million over the past year to just under 3.1 million. But the government data suggests that numerous people without jobs have given up their searches — a trend that could drag on future U.S. growth.

And average pay has grown just 2 percent a year during the recovery, roughly in line with inflation and below the long-run average annual growth of about 3.5 percent.

The lack of strong wage growth means the Federal Reserve may not feel pressure to start raising short-term interest rates soon as a way of controlling inflation.

"We are still not seeing any significant pickup in wage growth," Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a research note. "We suspect that Fed officials will continue to cling to the view that there is still plenty of slack in the labor market."

However, the steady hiring means businesses are increasingly competing to find workers.

"It's becoming more difficult to find the candidates that we're looking for," said Brandon Calvo, chief operating officer at Cosentino North America, a Houston-based firm that sells materials for kitchen counters and bathrooms.

The job gains have intensified despite the slump that kicked off 2014.

The economy's contraction in the first three months of this year was the sharpest since the recession. Ferocious winter storms caused factories to close and prevented consumers from visiting shopping malls and auto dealers.

Still, the frigid weather failed to freeze hiring. Job gains ramped up with the warmth of spring and summer.

"We've seen hiring growth out of the winter because it was stagnant," said Richard Bitner, vice president of marketing for Visiting Angels, a home health care services firm headquartered in Havertown, Pennsylvania.

Most economists say annualized economic growth likely reached a solid 3 percent to 3.5 percent in the April-June quarter. Growth over the entire year should be about 2 percent, they say, similar to last year's 1.9 percent expansion.

Several other signs point to the economy's brightening health.

Auto sales rose at the fastest pace in eight years in June. Factory orders picked up last month. And home sales strengthened this spring after having sputtered in the middle of last year when higher mortgage rates and rising prices hurt affordability.

Comments

VanX

God bless President Barrack Obama! Despite the obstructionism by the republican-led congress, he's managed to pull us from the worst of the considerable damage left us by the George W. Bush administration. Now let's arrest Cheney, W, Rumsfeld and Condi Rice as war criminals.

ILoveMyCountry

Part time jobs, no insurance. Yeah, O is such a guy! Bull s@@t!

zwesterhouse

I feel really bad for a young guy I know in his early twenties and he is an honorably discharged veteran. They guy in question works as a CNC programmer machinist and he is good at what he does. But on a constant basis he has around 54 hours a week in by Thursday and on top of that works Sundays since January of this year. Been watching his social life just dry up. All he does is work, work and work and his friends go to Silver Lake. His wages? $13.50 an hr. The owners? well they tell people if ya don't work overtime there is the door! He had a 6 pack with his shirt off, In 6 months ah he lost it and is putting on weight and tons of it. Economic Recovery is the wrong buzzword. Shouldn't be "Rise of Technological Slavery" Wouldn't Economic Recovery be for him getting $50/hr with bonuses and comp time maybe for all his overtime? Figured he has worked 4 weeks worth of extra overtime over 40 hours since January. All these CNC shops, machine building place and factories do this now. Economic Recovery is the wrong word. Would someone come up with a new buzz word for this to hit the media? Young men like this are being enslaved and its unhealthy, its a recipe for destruction and an early grave. We have computers though right? We should be working less? right? We have technological innovations right? So whats the heck is going on?

Vladtheimp

Some Inconvenient Truths about the "Recovery"

1. In June the BLS reports that the number of full-time jobs tumbled by 523K to 118.2 million while part-time jobs soared by 799K to over 28 million! (The highest number of part-time jobs since 1993).

2. [T]he unemployment rate for 18-29 year olds, including those who have given up looking for work, is 15.2% in June, according to a calculation by Generation Opportunity, a non-profit think-tank based in Arlington, Va.

3. The U-6 is still 12.1% and workforce participation rate at 62.8%, a 36-year low (when Jimmy Carter was President) http://t.co/fDxxOEGnGc

4. The sharp drop in unemployment has coincided with the end of emergency unemployment benefits. Obama and the Democrats, who insisted that the benefits be extended, wrongly predicted that their expiration would come as a calamity to the poor. Instead, their end has demonstrably had “precisely the opposite effect.” http://www.nationalreview.com/co...

VanX

Yawn. Blah, blah, blah. Yawn. Blah, blah, blah. You're fiddling while the congress does NOTHING!

Lanivan

Let's get the facts straight about the Vlad-supported, right-wing Republican strategy to block, filibuster, or otherwise pervert any legislation that would lower unemployment, address the severe student loan crisis, or raise the minimum wage.

1. The Democrat Bank on Students proposal, that would help 40 million people who are struggling with student loans, is being blocked from not only discussion but an up and down vote by the Republicans because is is funded by closing a few loopholes that would marginally increase the tax rate on the wealthiest millionaires and billionaires.

I repeat: The Republicans are blocking from even discussion, a proposal that would allow 40 million people an opportunity to refinance their student loans to today's lower finance rates solely because it would raise the tax rate on a few hundred of the wealthiest individuals.

2. The right-wing Republican congresspeople have repeatedly blocked minimum wage laws. These are laws that would greatly help millenials and college students. And don't think raising the minimum wage leads to unemployment - those states that have gone forward and raised the state minimum wage are seeing declining unemployment.

3. Dysfunctional Republicans have blocked a Senate bill aimed at narrowing the pay gap between men and women, which would create jobs, improve the economy, and level the playing field.

Our Republican legislators don't give a wit about our young people or college students, the economy or employment, or the health and welfare of the American citizen. Our Republican legislators are very interested, however, in limiting the average citizens right to free speech by putting limitations on our single vote, while removing any limitation on the corporate right to free speech in the form of political money or the corporate right to impose it's religious feelings on it's employees by denying health care the employee purchases therough their work.

Vladtheimp

Huh? How about some more inconvenient truths. In 2010 Obama took over the Student Loan Program from private banks, giving loans to virtually anyone whether qualified for college or not. At the same time he guaranteed colleges would raise costs to take advantage of the loose government loan money; he took away bankruptcy protections from the student borrowers, and he made the federales $41.3 billion in profits from student loans in the first 3 years. The program was touted to:

"The legislation will make it easier to pay back student loans, by reducing the share of income that a graduate must devote to loan payments and by accelerating loan forgiveness — but not right away. Those who take out new loans after July 1, 2014, will have to devote 10 percent of their income to payments, down from the current 15 percent, and those who keep up their payments will have their loans forgiven after 20 years, reduced from the current 25." http://www.nytimes.com/2010/03/2...

Having created the problem democrat socialists now want to further subsidize these students on the backs of taxpayers. Color me unsurprised.

2. On the minimum wage, there is real debate among serious economists about its impact on low wage jobs and prices. Regardless of your "science is settled" foolishness, the impacts are a crap shoot at best, but Obama has proven to be a good crap shooter.

"The Congressional Budget Office analyzed the proposal to increase the minimum wage to $10.10 and concluded that, under a mid-range estimate, it would lead to a loss of 500,000 jobs because of two key reasons: consumers buy fewer goods because of higher prices resulting from a minimum wage and because employers hire fewer workers because the cost of labor has increased. This is not an exact science, and CBO said the full range of the impact on employment was a very slight decrease in jobs to as many as 1 million fewer jobs." http://www.washingtonpost.com/bl...

On the fabulist war on women, there is virtually no real pay gap; Obama's White House displays a greater disparity in pay between genders than most, led by Moochelle, who employs Only 2 men but pays them 46% more than women on her staff. As has been stated, the only known victim of the War on Women was Mary Jo Kopechne.

VanX

Give me more, I can take it. yawn. blah blah blah.

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