US job creation roared back to life in
June, wiping away fears of a slowdown but calling into question a
hoped-for interest rate cut from the Federal Reserve despite months of
public pressure from President Donald Trump.
After an unexpectedly weak May, the vigorous June rebound delighted
President Donald Trump, who is preparing to seek reelection next year.
"JOBS, JOBS, JOBS!" he wrote on Twitter, claiming credit for record employment levels.
Trump, who recently likened the Fed to a "stubborn child" for dragging
its feet on a rate cut to boost the economy, again slammed the central
bank.
"Our country continues to do really well," but "If we had a Fed that
would lower interest rates, we would be like a rocket ship," he told
reporters at the White House.
"But we don't have a Fed that knows what they're doing."
The US economy added 224,000 net new jobs last month, smashing
forecasts, according to the Labor Department's closely-watched report.
The unemployment rate ticked up to 3.7 percent as more workers stepped off the sidelines to enter the labor force.
Employers added workers in construction, financial services, education,
business services, transportation and warehousing, following a
disappointing May when hiring unexpectedly slowed to just 72,000.
But the robust numbers disappointed stock markets, which had been
banking on an interest rate cut following a batch of soft economic data
and now see that move as less likely.
Some economists argue there is still enough economic uncertainty to
warrant an "insurance move" by the Fed, but Wall Street sank into the
red after the numbers were released, retreating from Wednesday's record
closes. The benchmark Dow Jones Industrial Average closed the day down
0.2 percent.
- Will the Fed disappoint? -
Economist Joel Naroff noted the irony of investors' preference for weak
numbers in the belief that a rate cut would prolong the rally in stocks.
"Indeed, there seems to be a perverse view that good is bad and bad is good," he said.
There were some soft spots in the jobs numbers, however. Auto
manufacturing employment contracted again, though marginally, meaning it
has been down for five of the last eight months.
And the retail sector's woes also continued, shedding another six thousand workers in the fifth straight month of losses.
Even with the latest gains, average job creation in the first half of
this year has slowed to 172,000 a month, from 223,000 in all of 2018.
Wage growth in June also fell short of expectations, as average hourly
earnings rose 0.2 percent to $27.90 an hour, slower than the 0.3 percent
economists had been expecting.
But worker pay was up 3.1 percent compared to the same month last year,
and has been at or above three percent for 11 straight months, steadily
outpacing inflation and delivering more purchasing power to wage
earners.
Meanwhile, more people came off the sidelines to look for work, which
pushed the unemployment rate back up to 3.7 percent, still very low by
historical standards.
Employers across the country have been complaining for months about the
shortage of available and qualified labor, and reporting that they have
had to increase benefits and offer more training to retain workers.
The Fed last month opened the door to an interest rate cut amid rising
uncertainties about the economy, including Trump's multifront trade
conflicts.
Despite Wall Street's fear that the strong job gains could delay a move,
economists said the Fed was still likely to cut rates as insurance
against a weakening global economy.
Futures markets as of Friday afternoon put the odds of a rate cut this
month at 95.1 percent, with at least one more expected as soon as
September.
"The economy does not need the Fed to ease but the market continues to
scream for action on July 31," Ian Shepherdson of Pantheon
Macroeconomics said in a note to clients.
"This Fed won't disappoint."
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