Unemployment rate goes up for all the right reasons

The May jobs report was surprisingly strong. Employers added 280,000 jobs, marking a rebound from the year's first quarter and stemming fears of an economic cool down. Judy Woodruff learns more from Diane Swonk of Mesirow Financial.

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    We start with a closer look at the surprisingly strong jobs report for May.

    Many economists said it should stem fears that the U.S. economy was cooling after growth contracted slightly in the first quarter of the year.

    Diane Swonk is senior managing editor and chief economist for Mesirow Financial. She joins me now from Chicago.

    Welcome again to the program, Diane.

    So, how good is this news that we're hearing today?

  • DIANE SWONK, Mesirow Financial:

    Well, it certainly was a real step in the right direction, as you mentioned earlier.

    What we saw was very broad-based gains in employment, with the exception of the mining sector, which has been hit by cuts in the oil industry. What it showed us is, we could go through those cuts and overcome with the job gains we saw.

    We also saw the quality of job gains improve along with the quantity. Not only did — professional services came back. Temporary hires came back. Hiring of college grads picked up a little bit. We also saw leisure and hospitality, which had suffered earlier in the year, come back, and that's a sign of a warming trend in summer bookings for vacation season.


    Well, we saw the unemployment rate go up. How do we interpret that?


    Well, the unemployment rate finally went up for the right reasons. This is the second month in a row that we saw more people optimistic enough to throw their hat back in the ring and actually look for a job.

    And that's something the Federal Reserve has been waiting for, that along with a little bit of an uptick in wages, something that we haven't seen in a very long time, although it's still not much. It was the best year-on-year wage numbers we have seen since 2011 and really, if we want to take it back, since 2009. And that's when they were falling apart.

    So, that's a step again in the right direction. We're inching towards a more healing and broad-based healing of the labor market, and that's something we'd all welcome.


    Well, let's get to the question that I think is on the minds of so many, and that is what's going to happen to interest rates. The speculation is that, because of this, the Fed is more comfortable raising rates this fall, but we noticed that, yesterday, the head of the IMF, Christine Lagarde, said no, wait until next year.


    What we're seeing is the real tug-of-war that is going on, the disruption that a rise in interest rate means to financial markets both at home and abroad.

    And so we have already seen really a bloody run-up in interest rates in terms of the bond market. We're at 2.4 percent today, a big jump in interest rates. The market hadn't been pricing in liftoff, but they're sort are go or no go. So, now they're sort of pricing in liftoff and no stop.

    This is a Federal Reserve that will be treading — as if they were treading on thin ice, even as the ground beneath us, economic ground, firms. That said, they're very conscious of the issues that Christine Lagarde brought up, and that is they deal with financial policy at home, monetary policy at home, but whatever happens abroad does show up on our shores.

    And what the IMF is concerned about is the ripple effects of interest rate increases and how those hit emerging markets. Those effects, we know, could come back and come back on us. And so that's why the Federal Reserve as it lifts interest rates is going to do so ever so cautiously and it's not going to do so quickly. It doesn't want to snuff out the overall recovery and it's very concerned as well about the financial market volatility that's likely to come from this.

    It's been almost a decade since they raised rates.



    That's right. It's been a long time.

    And, as you were saying, it's how gradually they raise them that will make a lot of difference.

    Diane Swonk, we thank you.


    Thank you.