Hiring bounced back in June as employers added 222,000 jobs, easing concerns about the health of the economy and helping cement Federal Reserve plans to unwind its longstanding stimulus measures.
The unemployment rate, which is calculated from a different survey, rose from 4.3% to 4.4% as a large rise in employment was offset by an even bigger increase in the labor force, which includes all Americans working and looking for jobs, the Labor Department said Friday.
Economists expected 183,000 payroll gains, according to a Bloomberg survey.
Also encouraging: job gains for April and May were revised up by 47,000. April’s was revised to 207,000 from 174,000, and May’s to 152,000 from 138,000.
In June, businesses added 187,000 jobs. Federal, state and local governments added 35,000.
Wage growth, however, remains lackluster despite the low unemployment rate, which should be prodding more employers to bid up paychecks. Average hourly earnings rose 4 cents to $26.25, keeping annual gains unchanged at 2.5%. Average pay has picked up the past year or two from a tepid 2% pace, but the increases have retreated in recent months from close to 3%.
The Fed is seeking sharper advances in earnings and inflation to underpin its plan to raise interest rates for a third time in 2017 and unwind its $4.5 trillion balance sheet, a move that almost certainly will push up long-term rates. Still, the solid June job gains likely keeps the Fed on track for both moves. Many economists expect the Fed to begin shrinking its portfolio in September.
“Despite the lack of a pickup in wage growth and core inflation, the Fed will nevertheless push ahead with hiking interest rates,” economist Paul Ashworth of Capital Economics wrote in a note to clients.
Analysts expected the labor market to rebound last month after a weak showing in May that many attributed to measurement challenges faced by Labor officials. Since Labor’s survey was conducted early in May, it likely failed to count many of the college students who took summer jobs later in the month, according to Barclays. The influx of those workers was expected to bolster the June tally.
Many economists figure average monthly employment growth will slow this year to about 170,000 from 180,000 last year and 226,000 in 2015 as the low jobless rate makes it tougher for employers to find workers. But that pace still would be far more than the 100,000 or so monthly additions needed to continue pushing down unemployment.
There were other positives in the report. The average workweek ticked up to 34.5 hours from 34.4 hours. And the number of temporary workers increased by 13,000. Both could be signs that employers are likely to hire more permanent staffers in coming months.
At the same time, a broader measure of unemployment that includes discouraged Americans who have stopped looking for work and part-time employees who prefer full-time jobs rose to 8.6% from 8.4%. Still, this shadow labor force generally has been shrinking.
Education and health care led the payroll gains with 45,000. Leisure and hospitality added 36,000 jobs; professional and business services, 35,000; financial firms, 17,000; and construction, 16,000. Mining companies, including oil producers, added 8,000 jobs, sustaining a recent string of increases after sharp cuts the prior two years.
Retailers added 8,000 jobs, breaking a series of employment losses caused by a shift in shopping from brick-and-mortar stores to online.
Other employment indicators last month generally were encouraging. First time jobless claims, a measure of layoffs, have hovered near four-decade lows. Americans perceive jobs as plentiful, Conference Board surveys show. And while an index of service-sector employment dipped, a reading of factory hiring rose sharply.
Payroll processor ADP estimated this week that the private sector added a lackluster 158,000 in June, but that survey was unaffected by the measurement problems that beset Labor in May and the offsetting rebound in June.