Economy adds 213K jobs in June, unemployment ticks up to 4 percent
The U.S. economy added a solid 213,000 jobs in June, a stronger number than expected and a sign of the labor market’s steady strength even as concerns mount about President Trump’s trade policy.
The unemployment rate ticked up slightly to 4 percent from 3.8 percent as more workers jumped into the labor market, the Labor Department reported on Friday.
The economy has added jobs for 92 straight months, beginning in October 2010 under President Obama, the longest streak on record.
Job gains also rose 37,000 more than previously reported in April and May.
“If any doubts lingered that slack in the labor force — the number of Americans on the sidelines waiting for a good opportunity — has been underestimated, they were quashed with this report,” said Robert Frick, corporate economist with Navy Federal Credit Union.
Unemployment rose as 601,000 people entered the labor market and not all of them found a job.
“This slack could be one reason why wage growth disappointed again,” Frick said.
“The labor market must tighten more before wage gains rival previous expansions and American workers can fully enjoy the fruits of this expansion,” he said.
Wage growth remained lackluster with average hourly earnings up only 2.7 percent for the year.
Fewer burdens on employers — tax and regulatory cuts — have yet to yield better pay for workers. Even with the slow rate of pay growth, economists still expect that paychecks will grow as the labor market continues to tighten.
“The tight labor market is leading businesses to raise pay to retain their current workers and attract new ones, and wage growth will strengthen through the rest of this year and into 2018,” said PNC Chief Economist Gus Faucher.
The unemployment rate rose in June for the first time since January 2017 but is expected to fall through the rest of the year to about 3.5 percent, Faucher said.
After revisions, job gains have averaged 211,000 per month over the past three months.
But Trump’s decision to levy tariffs on close U.S. allies has led to massive retaliatory tariffs on U.S. exports, which trade experts argue will cost jobs and damage the healthy economy.
On Friday, the U.S. and China exchanged tariffs of $34 billion on each other’s exports, with billions more expected to come in the months ahead.
Business groups, lawmakers and foreign leaders have urged Trump to work with top trading partners such as Mexico, Canada and the European Union on global trade.
“The major downside risk is trade,” Faucher said.
“Right now the tariffs imposed by the United States, and the retaliation from its trading partners, are limited and will have minimal impact on U.S. and global economic growth and the U.S. job market,” he said.
“But if the U.S. and other nations enter into a full-fledged trade war with tit-for-tat responses, global economic growth could slow dramatically and weigh on the U.S. economy, leading to much weaker job growth by the end of the year.”
The Federal Reserve at its June meeting noted that some businesses had expressed concern about the “possible adverse effects of tariffs and other proposed trade restrictions, both domestically and abroad, on future investment activity.”
The Fed on Thursday noted that companies have “indicated that plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy.”
Steel and aluminum firms have said they expect price increases after Trump imposed tariffs of 25 percent on steel imports and 10 percent on aluminum coming into the United States.
“There is no longer a ‘threat’ of a global trade war, the battle has begun,” said Hun Quach, vice president of international trade for the Retail Industry Leaders Association.
“Americans are caught in the crosshairs of the administration’s three-front trade war, and they will be the ones paying the price,” Quach said.
“The recent onslaught of tariffs will jeopardize manufacturing and agriculture jobs in the U.S. while driving up prices on household items.”
Retailers shed 22,000 jobs last month after adding 25,000 in May.
Manufacturers, which added 36,000 jobs in June, also expressed concern about the use of tariffs to force China to change its trade policies.
“Tariffs have not and will not solve the existing problems in China,” said National Association of Manufacturers President and CEO Jay Timmons.
“Tariffs will bring retaliation and possibly more tariffs,” Timmons said.
“No one wins in a trade war, and it is America’s manufacturing workers and working families who will bear the brunt of continued tariffs.”
A separate report released Thursday by private payroll processor ADP showed that American companies added 177,000 workers last month, fewer than the 189,000 added in May.
But amid the labor market’s expansion, there is growing concern about the shrinking labor pool, with the unemployment rate expected to eventually fall to historically low levels.
Mark Zandi, chief economist at Moody’s Analytics who oversees the ADP report, said the top problem for U.S. businesses is finding qualified workers.
“At the current pace of job growth, if sustained, this problem is set to get much worse,” Zandi said.
“These labor shortages will only intensify across all industries and company sizes,” he said.
The Fed also said that “labor market conditions continued to strengthen in recent months” and gross domestic product (GDP) “appeared to be rising at a solid rate in the first half of the year.”
Despite robust jobs growth during the first three months of the year, the economy’s expansion slowed to a 2 percent annual pace, down from the 2.2 percent rate initially reported.
Economists are expecting a stronger April-June quarter, with growth estimates in the 4 percent range.
Many sectors continue to see strong growth.
Employment in professional and business services increased 50,000 in June and has risen by 521,000 over the year.
Construction employment rose 13,000 in June and has increased 282,000 over the year.
Health-care payrolls jumped 25,000 for the month, increasing by a total of 309,000 for the year.
Mining employment continued on an upward trend in June, adding 5,000 jobs last month. The industry has added 95,000 jobs since a low point in October 2016.
Retailers lost 22,000 jobs last month after a gain of 25,000 in May.
–Updated at 10:26 a.m.
Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.