Strong gains in June show better than expected job market

| Friday, July 5, 2013, 9:33 a.m.

Monthly job gains averaging about 200,000 through June strongly exceed monthly gains in 2012 and likely set a healthier pace for the nation's economic recovery for the rest of this year.

The Labor Department on Friday reported the addition of 195,000 jobs in June, which means the Federal Reserve may pull back on efforts to hold down interest rates and spur consumer spending. Most economists expected about 166,000 new jobs last month.

“The labor market is stronger than we thought it was, and that's obviously a positive,” said Gus Faucher, senior economist at PNC Financial Services Group.

“It indicates businesses are slowly recovering from the Great Recession, that they are seeing strong demand and they are hiring to keep up with that,” Faucher said.

The government also revised upward May employment gains to 195,000 from 175,000 and April gains to 199,000 from 149,000. Monthly job gains averaged 183,000 in 2012.

The 7.6 percent unemployment rate last month was unchanged from May and compared with 8.2 percent in June 2012. The government derives the rate from a survey of households.

“The fact the unemployment rate held steady is not bad news,” Faucher said.

Employers will add “about 200,000 jobs a month on a sustained basis,” said Paul Edelstein, director of financial economics for IHS Global Insight, Lexington, Mass.

The nation's labor market is “not in great shape, but it's in better shape than we thought,” said Edelstein, noting employment gains in construction and professional services in particular.

Fed Chairman Ben Bernanke recently said the central bank this fall would pare back its $85 billion-a-month bond-buying program aimed at keeping interest rates very low, if it saw a better labor market outlook. Faucher said the June employment report seems to meet that condition.

The number of unemployed people remained about 11.8 million in June. But more jobless people were encouraged enough to look for work, said the PNC economist. That swelled the size of the labor force, which is the number of people working or looking for a job. When people without a job start looking again, they are counted as unemployed.

Faucher said the rise of the labor force participation rate to 63.5 percent last month from 63.4 percent in May showed “people are more encouraged about the economy.” That rate is the share of the working-age people with a job or actively looking for one.

“I think that rate will continue to move higher,” Faucher said.

Average earnings rose 10 cents an hour to $24.01 in June, which was 2.2 percent higher than in June 2012, Labor Department figures showed.

“If that can be sustained, it means wages are keeping pace with inflation, and that will filter into inflation,” Edelstein said.

June job gains primarily stemmed from hiring in leisure and hospitality, professional and business services and retail, according to the government's separate survey of employers.

The construction industry added 13,000 jobs last month, which reflects “a rebound” in the housing market, Faucher said.

Manufacturing employment declined by 6,000 in June, the fourth straight month of declines. The sector has recovered less than one-quarter of the 2.28 million jobs lost during the Great Recession, said the U.S. Business and Industry Council.

Faucher said it is “typical” for manufacturing employment gains to pick up early in an economic recovery then flatten out as business investment loses steam.

Thomas Olson is a Trib Total Media staff writer. He can be reached at 412-320-7854 or at

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