The rise in the United States unemployment rate isn’t bad news

  • The rise in the United States unemployment rate isn’t bad news

The rise in the United States unemployment rate isn’t bad news

US unemployment rate ticked up to 4 percent in June from an 18-year low in the previous month, the Labor Department reported on Friday. That's an increase in total employment of a quarter of a million jobs.

The job growth shows the labour market shrugging off worries about a slowdown triggered by trade fights or rising borrowing costs.

One reason that some employers may not be feeling pressure to raise wages is that more people are beginning to look for work, thereby keeping up the pool of job applicants: The ranks of unemployed people seeking jobs jumped by 499,000 in June, which caused the unemployment rate to rise from its previous 18 year-low.

On the negative side, the unemployment rate for black workers increased 0.6 percentage points to 6.5 percent from the record low hit in May. Over the past three months, the economy has produced a robust average monthly job gain of 211,000.

For the month of June, wages increased at a relatively solid annual rate of 2.7 percent. This means that workers' wages will likely fall behind the rate of inflation, which in May reached 2.8 percent. While improving prospects for employment and wages are helping attract people from the sidelines of the job market, the retirements of older workers are among factors that have been exerting downward pressure on participation.

Minutes of the Fed's June 12-13 policy meeting published on Thursday offered an upbeat assessment of the labor market.

The Fed raised its target range for the benchmark federal funds rate in June for the second time this year, and penciled in two more rate hikes in the second half of the year.

The dollar fell to a three-week low against a basket of currencies on the employment report.

Trump has also spoken about slapping tariffs on imported cars, trucks and auto parts, which General Motors has warned could hurt the US auto industry and drive up vehicle prices.

This follows a survey in June, which showed record-high optimism among USA manufacturers.

Strong jobs growth continues at a time when the economy is growing 4%, and inflation is about to break 3%.

Economists polled by Reuters had forecast nonfarm payrolls increasing by 195,000 jobs last month and the unemployment rate steady at 3.8 percent.

"If payroll growth remains anywhere near 200,000, the downward trend in the unemployment rate will return in due course", said Ian Shepherdson, chief economist of Pantheon Macroeconomics.

Gross domestic product estimates for the April-June period are above a 4 percent annualized rate, double the 2.0 percent pace logged in the first quarter.

The report showed that Canada's trade surplus with the US narrowed to $3.3 billion in May, from $3.7 billion April, as more imports headed north across the border and south-bound exports decreased.

Major trade partners, including China, Canada, Mexico and the European Union, have retaliated with their own tariffs.

Just hours before the monthly reports came out, the Trump administration imposed tariffs on $34 billion worth of Chinese imports, prompting the Asian country to immediately reiterate. More specifically, hiring in the manufacturing sector - which should be the most sensitive to retaliatory trade sanctions - is running at the fastest pace since 1998.

Although the report for June was far from uniformly strong, it will reinforce the perception that the US will continue to outpace other countries and should be able to navigate trade policy uncertainties as long as they don't lead to a full-blown global trade war.

Manufacturers hired 36,000 workers in June, the most in six months, adding to the 19,000 jobs created in May. The factory jobs were concentrated in the automobile sector, which had seen a decline in employment in May after a fire at a parts supplier disrupted production.

The picture was brighter for the leisure and hospitality industry. Last month, U.S. employers added 213,000 jobs, exceeding already high expectations of 195,000. More work undertaken by the project-design community will eventually lead to more on-site "hard hat" activity.