U.S. Economy Adds 222,000 Jobs in June

• U.S. Economy Adds 222,000 Jobs in June

The employers in the U.S. added more jobs to the payroll than analysts had predicted.

According to the Labor Department, employers created 222,000 jobs in the month of June, up from the revised 152,000 (originally reported as 138,000) jobs created in the month of May and more than 175,000 jobs expected by most analysts.

However, the unemployment rate increased to 4.4 percent from a 16 year low of 4.3 percent, while average earnings rose by 0.2 percent on a monthly basis and surged by 2.5 percent on a yearly basis. Indicating that earnings growth rate is still below the Fed’s target but steady and not as low as most analysts have asserted.

Also, the data showed the labour market is attracting people outside the job market, hence, the reason why both the size of the labour force and the number of unemployed people increased in the month. Pushing the number of people who went from outside the workforce to getting employed to 4.7 million, the highest since 1990.

This further validated the Federal Reserve Chair Janet Yellen statement that the economy necessitates gradual policy tightening to pull potential workers back into the labor market.

While the payroll report keeps the Fed on track to hike rates at least once more this year and commence normalisation of its $4.5 trillion balance sheet, it also cautions the central bank from moving aggressively as wages and consumer prices are below expectation. Therefore, while it is expected that strong hiring will feed through to higher wages and pressure prices in the long run, the Fed must move gradually to sustain growth.

“We’re just not seeing much acceleration in wages. The unemployment rate picked up for the right reasons. The participation rate ticked up as job seekers came back into the market. It could reflect increased confidence in the labor market,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “We’re seeing pretty steady, solid hiring.”

“It’s mixed — We had a little higher unemployment, little softer wages but then very strong payrolls,” he added.

The U.S. services sector expanded faster than projected in June, rising to 57.4 from 56.3 in May.