US job growth surges, July rate cut expectations intact

Job applicants wait in line at the Seminole Hard Rock Hotel & Casino Hollywood during a job fair in Hollywood Fla. on Thursday.   Wilfredo Lee    
  AP

Lack of concrete progress in resolving an acrimonious trade war between the United States and China, however, means the bar could be very high for the Fed not to lower borrowing costs at its July 30-31 policy meeting.

Some 224,000 jobs were created in June, more than the 160,000 that economists had forecast.

Average hourly earnings rose 6 cents to $27.90 after a 9-cent increase in May.

This healthy jobs report, however, could give the Fed pause.

"The data are unlikely to stop the Fed from easing at this month's meeting", said Jim O'Sullivan, chief USA economist at High Frequency Economics in White Plains, New York.

"We're seeing uncertainty linger in the background", House said. Within private service-producing industries, which typically account for the lion's share of job creation, payrolls added 154,000 workers, led by gains of 51,000 each in health care and professional and business services and followed by gains in transportation of 24,000. However, that will probably not be enough to discourage the Federal Reserve from chopping rates of interest this month amid growing evidence the economy is slowing. That's similar to the pace of hiring in the first three months of the year, but reflects a slowdown from the end of 2018, when monthly job gains averaged 233,000.

Nonetheless, in context of a low inflation indication alongside heightening risk over USA economy from an exacerbated trade spat with China, last month Fed signaled an interest rate cut as early as this month. The Fed last month signaled it might ease monetary coverage as early as July, citing low inflation in addition to rising dangers to the economy from an escalation in trade tensions between Washington and Beijing.

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The unemployment rate ticked up to 3.7%.

The new jobs report is in and it looks like the numbers reported by the Bureau of Labor Statistics are blasting through expectations. Wage growth remains strong, at above 3% year-over-year, for the 11th month in a row, as a tight labor market forces employers to share the wealth generated by solid Trump-era GDP growth. Some of the recent drop in the jobless rate had been because of people leaving the labor market.

The trend in wage growth has slowed from late a year ago when wages were rising at their fastest rate in a decade, pointing to moderate inflation.

But, some economic experts predict that the Fed will cut rates, and the jobs report bolsters confidence to do so.

Overall, the labor force participation rate rose one-tenth to 62.9%, while the total labor force increased by 335,000 to just under 163 million.

Hiring picked up across almost all sectors in June, though retail payrolls contracted for a fifth straight month, shedding another 5,800 jobs on top of the 7,300 lost in May. Construction companies added 21,000 workers after having increased their payrolls by only 5,000 in May. The benchmark Dow Jones Industrial Average closed the day down 0.2 percent.

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