Published: Sun, July 08, 2018
Economy | By

U.S. Jobs Report Underlines The Case For Rate Hikes

U.S. Jobs Report Underlines The Case For Rate Hikes

The details across industries showed continued strength in goods-producing jobs: Manufacturing added 36,000 to payrolls, the best month since December, including a 12,000 increase in the auto industry, the most since August.

Services sectors, meanwhile, lost 14,700 jobs mostly because of big decreases in accommodation and food services positions as well as wholesale and trade.

As unemployment rose slightly to 4.0 percent, the closely-watched labor force participation rate also edged higher to 62.9 percent, while the number of people counted as unemployed rose to 6.6 million people, up almost a half million.

"Despite ongoing concerns about being on the brink of a trade war, today's jobs report shows the continued strength of the economic recovery in the USA", said Tony Bedikian, head of global markets at Citizens Bank.

In another sign of vigorous demand for labor, the results for April and May were revised higher by a total of 37,000 new jobs, bringing the average for the past three months to 211,000.

The bottom line is that the buoyancy in June's US labor market statistics will reaffirm the Federal Reserve's view that the economy is doing super-well at present and that further interest rate hikes will be justified. That followed an increase of 5,000 jobs in May.

Donald said key indicators from the labour force data included the higher participation rate and still-strong wage gains.

It would also be important to watch secondary indicators of employment that are not as impressive as the headline unemployment rate, such as the share of people who are working part-time but would prefer full-time jobs.


The job tally, nonetheless, shows the sustained prowess of the economy, which has now maintained 9 years of expansion, the second longest period on record.

Wage growth is barely keeping ahead of inflation, which is firming up as the economy strengthens. But retailers cut 21,600 jobs last month, after boosting payrolls by 25,100 in May.

What about tariffs? On Friday, the US formally imposed an additional $34 million in tariffs on China.

Economists polled by Reuters had forecast nonfarm payrolls increasing by 195,000 jobs last month and the unemployment rate steady at 3.8 percent. The figure for aircraft imports more than tripled to $937 million due to the purchase of several air liners from the U.S. "The unchanged 2.7 percent rise in June helps keep the Fed on a gradual path of rate hikes", MarketWatch said.

The Trump administration has also applied tariffs on steel and aluminum from allies like Canada and Mexico and has threatened to abandon the North American Free Trade Agreement with those two countries.

Economists have warned the tit-for-tat import tariffs could disrupt the supply chain, undermine business investment and raise prices for consumers, and wipe out the stimulus from a $1.5 trillion tax cut package that came into effect in January.

Mara Fortin, who owns seven Nothing Bundt Cake stores in the San Diego area, said she raised pay last month to $13 an hour from $11.50.

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.

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