The U.S. economy surpassed expectations in June, adding more jobs than expected even as the unemployment rate rose slightly to 4 percent.
Along with the 213,000 jobs added in June, the jobs numbers for April and May were also revised to include 37,000 additional new hires across those months, according to data released Friday by the Bureau of Labor Statistics.
Manufacturing and health care added the most jobs in June — hospitals added 11,000 jobs over the course of the month — while the retail industry lost 22,000 positions, a disappointing turn from what had been an encouraging boost in May. Hourly wages increased by 0.2 percent for an average annual increase of 2.7 percent, lower than analysts had hoped.
Here’s what the latest report means for American workers and the U.S economy as we approach the second half of 2018.
No evidence of a skills shortage. Some recent reports have suggested that businesses can’t find qualified workers at the wages they’re offering — but this report “did not have any evidence to back up those claims,” said Elise Gould, a senior economist with the Economic Policy Institute. “Not only did payroll employment increase by 213,000 — evidence that employers are finding workers — but wage growth held steady at a disappointing 2.7 percent — evidence that employers are not having to raise wages to attract and retain workers.”
“As the labor market tightens we should see more businesses raisings wages, offering training, and hiring workers from all corners of the labor market,” she added.
The rise in unemployment isn’t as bad as it seems, said Mark Hamrick, a senior economic analyst for Bankrate.com. “At first glance, the bump in the unemployment rate … gives the headline numbers a mixed hue, but the reality is that it is good to see more people both working and looking for work,” he said. More than 600,000 workers joined the economy last month, bringing the total labor force participation rate to 62.9 percent.
“Let’s remember that for some time, the unemployment rate has been below the level typically associated with ‘full employment,’ but the relatively robust level of hiring being seen suggests there’s more room” for the jobless rate to drop, he added.
The lack of wage growth is disappointing, but still higher than the rate of inflation, said Douglas Holtz-Eakin, president of the American Action Forum. “This generates a rising standard of living and strong income growth. Combined with additional jobs and steady hours, payrolls are up by 5 percent since June 2017.”
What about tariffs? On Friday, the U.S. formally imposed an additional $34 million in tariffs on China. It’s too soon to tell what impact they’ll have — hiring in manufacturing continues to be strong, with 36,000 jobs added in June — but what we do know is that they are creating uncertainty, Hamrick said.
He pointed to minutes from the June Federal Open Market Committee, which indicate that some business leaders’ “‘plans for capital spending had been scaled back or postponed,’” which will likely also affect hiring. “Aside from the immediate job market impacts, the trade disputes risk raising prices for consumers hurting their purchasing power, which then reinforces the dampening impact on the job market,” Hamrick added.
The look ahead: “Ignore the uptick in the unemployment rate that stems from the rising labor force. Continue to look for even faster wage growth. But enjoy the good news in the June report,” Holtz-Eakin said.