Update: Payrolls in US rose in June with little change in wages

An increase in June payrolls followed smaller gains in the prior two months and wages were little changed as US job market reflected a more moderate pace of economic growth. 

PHOTO: BLOOMBERG

JUL 2, 20158:53 PM

[WASHINGTON] An increase in June payrolls followed smaller gains in the prior two months and wages were little changed as US job market reflected a more moderate pace of economic growth.

The addition of 223,000 jobs followed a 254,000 increase in the prior month that was less than previously estimated, a Labour Department report showed Thursday in Washington. The jobless rate fell to a seven-year low of 5.3 per cent as more people left the labour force.

The figures indicate corporate managers are confident they can temper hiring and meet demand against a backdrop of stronger consumer spending and feeble overseas markets. At the same time, more moderate job gains may still be enough to reduce the unemployment rate, consistent with the Federal Reserve's perceived timetable to raise borrowing costs by year-end.

"One month's low number wouldn't shake our optimism," Ryan Sweet, a senior economist at Moody's Analytics Inc. in West Chester, Pennsylvania, said before the report.

"The job market still has a ways to go but we're making progress."

The median forecast in a Bloomberg survey called for a 233,000 advance. Estimates of 97 ranged from gains of 160,000 to 350,000 after a previously reported 280,000 advance for May. Revisions to prior reports subtracted a total of 60,000 jobs from payrolls in the previous two months.

The economy has just completed its sixth year of expansion since the recession ended in June 2009. While the job market has rebounded, faster wage growth has been slow to follow suit.

Average hourly earnings at private employers held at $24.95. They increased just 2 per cent over the 12 months ended in June, following a 2.3 per cent gain the prior month. They've posted a 2 per cent gain on average since the current expansion began.

Seasonal adjustments, or a calendar bias, probably explain the downward pressure on the wage figures in June after artificially boosting them in May, according to economist Ted Wieseman of Morgan Stanley and Lou Crandall, chief economist at Wrightson ICAP LLC.

The unemployment rate, which is derived from a separate Labour Department survey of households, fell from 5.5 per cent and is the lowest since April 2008. The decrease reflected fewer Americans in the labour force.

October 1977 The participation rate, which indicates the share of the working-age people in the labour force, decreased to 62.6 per cent, the lowest since October 1977, from 62.9 per cent.

Government payrolls were little changed in June after a 4,000 increase in May. Employment at state and local agencies is often influenced this time of year by swings in the timing of school closings for summer recess.

Retailers increased payrolls by 32,900. Employment in leisure and hospitality rose 22,000.

Factories increased payrolls by 4,000 after a 7,000 gain a month earlier. Manufacturing and mining have been hurt by cutbacks in drilling and exploration following the plunge in oil prices.

The improving outlook for the labour market is among the reasons Fed policy makers have said they may begin to raise the benchmark interest rate this year from near zero.

Fed Chair Janet Yellen has said she expects the central bank to raise borrowing costs this year, and that subsequent increases will be gradual without following a predictable path.

"Although progress clearly has been achieved, room for further improvement remains," Yellen said at a June 17 press conference. She described wage growth as "relatively subdued." Recent data underscore why employers are adding staff. Consumer purchases, which account for about 70 per cent of the economy, rose 0.9 per cent in May, the biggest gain since August 2009, Commerce Department figures showed last week.

Households are feeling upbeat about employment prospects as more respondents than at any time since early 2008 said jobs were plentiful, a Conference Board report showed on Tuesday.

A separate report Friday from the Labour Department showed applications for unemployment benefits held below 300,000 for a 17th straight week. Jobless claims rose by 10,000 to 281,000 in the week ended June 27. The median forecast called for 270,000 applications.

BLOOMBERG