U.S. employers added a robust 195,000 jobs in June and many more in April and May than previously thought. The job growth suggests a stronger economy and makes it more likely the Federal Reserve will slow its bond purchases as early as September.
The unemployment rate remained 7.6 percent because more people started looking for jobs - a healthy sign - and some didn't find them. The government doesn't count people as unemployed unless they're looking for work.
The U.S. job market is showing surprising strength and resilience in the face of tax increases, federal spending cuts and economic weakness overseas. Employers have added an average 202,000 jobs for the past six months, up from 180,000 in the previous six.
June's job gain was fueled by consumer spending and the housing recovery. Hiring was especially strong among retailers, hotels, restaurants, construction companies and financial services firms.
"The numbers that we're seeing are more sustainable than we thought," said Paul Edelstein, U.S. economist at IHS Global Insight, a forecasting firm. "We're seeing better job numbers, the stock market is increasing and home prices are rising."
Pay also rose sharply last month and is outpacing inflation, the Labor Department's monthly jobs report Friday showed. Average hourly pay rose 10 cents in June to $24.01. Over the past 12 months, it's risen 2.2 percent. Over the same period, consumer prices have increased 1.4 percent.
Stocks rose sharply in early afternoon trading. The Dow Jones industrial average was up 85 points. And the yield on the 10-year Treasury note jumped from 2.56 percent to 2.71 percent, its highest level since August 2011. That's a sign that investors think the economy is improving.
Friday's report showed the economy added 70,000 more jobs in April and May than the government had previously estimated - 50,000 in April and 20,000 in May.
Further job growth could lower the unemployment rate and help the economy rebound after a weak start this year. If so, the Fed would likely scale back its bond purchases before the year ends.
The Fed has been buying $85 billion worth of Treasury and mortgage bonds a month since late last year. The purchases pushed long-term rates to historic lows, fueled a record-breaking stock market rally and encouraged consumers and businesses to borrow and spend. They've also helped support an economy that's had to absorb federal spending cuts and a Social Security tax increase that's reduced consumer paychecks this year.
Friday's report contained one element of concern: Many of the job gains were in generally lower-paying industries, a trend that emerged earlier this year. The hotels, restaurants and entertainment industry added 75,000 jobs in June. This industry has added an average of 55,000 jobs a month this year, nearly double its 30,000 average in 2012. Retailers added 37,000. Temporary jobs rose 10,000.
The health care industry added 20,000 and construction 13,000. But manufacturing shed 6,000.
Many of the new jobs were part time. The number of Americans who said they were working part time but would prefer full-time work jumped 322,000 to 8.2 million - the most in eight months.
Last month's job growth came solely from the private sector, particularly services firms. Government jobs fell 7,000, mostly at the federal level. The federal government has shed 65,000 jobs in the past 12 months. Some of that decline likely reflects the federal budget cuts that kicked in March 1.
Declining government employment has been a drag on the job market since the recession ended four years ago. In a typical recovery, governments typically add at least 20,000 jobs a month.
Solid hiring in the private sector is pushing up wages, even in some lower-paying industries. Average hourly wages for retail employees rose 6 cents in June to $16.64 and have risen nearly 2 percent in the past year.
The overall increase in pay is "the standout feature of this report," said Ryan Sweet, an economist at Moody's Analytics. The low inflation rate also helps consumers, he noted.
"The tide is continuing to turn for the consumer," Sweet said. "The consumer is going to continue to be able to shoulder this recovery."
The unemployment rate is derived from a survey of households, which found that 177,000 more people started looking for jobs in June. Most found them. The increase suggests that Americans think their job prospects have brightened.
But because some of the job seekers didn't find work right away, the number of unemployed was largely unchanged at 11.8 million.
The 195,000 job gain for June is calculated from a separate survey of employers.
The percentage of Americans either working or actively looking for work rose for a second straight month to 63.5 percent. This is known as the "labor force participation rate." The participation rate has been generally declining since peaking at 67.3 percent in 2000. That's partly the result of baby boomers retiring and leaving the workforce.
Despite the solid pace of hiring in June, the economy is growing only sluggishly. It expanded at a 1.8 percent annual rate in the January-March quarter. Most analysts expect growth at roughly the same subpar rate in the April-June quarter.
Weak economies overseas cut demand for U.S. exports in May. That led some economists to predict that growth in the second quarter might be slower than forecast.
Still, many areas of the economy are improving. The Fed's low-rate policies have led more Americans to buy homes and cars. They also helped boost stock and home prices in the first half of the year, increasing wealth and lifting consumers' confidence to its highest level in 5 1/2 years.
Auto sales in the January-June period topped 7.8 million, their best first half since 2007, according to Autodata Corp. and Ward's AutoInfoBank. Sales of previously occupied homes exceeded 5 million in May, the first time that's happened since November 2009. New-home sales rose at their fastest pace in five years.
Though fewer exports have hurt manufacturing, factories fielded more orders in May. And a measure of business investment rose for a third straight month.
Diane Swonk, chief economist at Mesirow Financial, said she thinks the improving job market will lead the Fed to taper its monthly bond purchases starting in September from $85 billion to $65 billion. She predicts the Fed will reduce its monthly purchases by an additional $20 billion in December.
Swonk said she thinks the Fed will end its bond buying altogether in the second half of 2014.
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