By Ben Sirois, Economist, Dodge Data & Analytics
Nonfarm payrolls accelerated by an unexpectedly strong seasonally adjusted 222,000 in June, higher than the 178,000 predicted in a Bloomberg poll of economists. Job gains for April and May were adjusted upward as well, adding 47,000 compared to what had been previously reported. The three-month average increased to 194,000 bringing the 2017 year to date average to 180,000 jobs added per month. While the rate of job creation has moderated in the past year, the labor market remains strong and an uptick in the participation rate from 62.7% to 62.8% suggests it is slowly pulling discouraged workers back into the labor force. Despite the strong topline number of jobs added, the increase in labor force participation led to an increase in the unemployment rate to 4.4% in June from 4.3% in May.
The private sector added 187,000 jobs in June, with the largest gains coming from education and health services (+45,000), leisure and hospitality (+36,000), and professional and business services (+35,000). Construction hiring continued to improve adding 16,000 jobs in June with a large increase in specialty trade contractors (+18,500) offsetting minor declines in residential (-1,500) and nonresidential (-3,200) building. Heavy and civil engineering saw a slight gain of 2,500 jobs. The public sector saw employment growth of 35,000 with local government dominating the gains.
Wage growth remains stubbornly tepid, increasing 2.5% year on year. Relatively low wage growth combined with historically low labor force participation levels suggest that there continues to be slack in the market not reflected in the 4.4% unemployment rate. However, continued robust job growth and stock market indices that are near their all-time highs suggest that the Federal Reserve will continue its policy of gradual monetary tightening. The Fed dot plot indicates one more interest rate hike is likely on its way later this year.
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