WASHINGTON, July 6: The US economy churned out 132,000 new jobs in June and created more than estimated in April and May, government data showed on Friday, signalling solid growth despite a struggling housing market.
The unemployment rate held steady at 4.5 per cent for the third month in a row, the Labour Department report showed.
The number of new jobs in the monthly report on non-farm payrolls topped Wall Street economists' consensus forecast of 125,000; the 4.5 percent jobless rate was in line with expectations.
The report appeared to support the Federal Reserve’s view that the economy is pulling out of the first-quarter soft patch, despite a persistent slump in the housing sector, analysts said.
“Today’s report adds to the evidence that the economy bounced back in the second quarter, probably to the 3.0 to 3.5 per cent range, from the anaemic 0.7 per cent GDP growth rate in the first quarter,” said Nigel Gault, economist at the research firm Global Insight.
Economists closely monitor the creation of jobs, which is seen as one of the best indicators of economic momentum. They estimate 110,000 to 140,000 jobs need to be created each month to absorb growth in the number of people seeking work.
June was the 46th consecutive month of rising employment in the US. The unemployment rate was slightly below the average for 2006, and well below the average of the past four decades.
The Labour Department upwardly revised US job gains in April and May by a total of 75,000. That meant 190,000 jobs were gained in May -- the biggest increase since December 2006 -- from an initial estimate of 157,000, and 122,000 in April, instead of 80,000.The United States added 135,000 jobs in the service sector; 59,000 in education and health services; 40,000 in the government; and 12,000 in the construction sector.
On the downside, manufacturing lost 18,000 jobs, continuing a year-long contraction, and the retail sector lost 24,000 jobs.
“All in, this is still a solid economic report, which shows the US economy is weathering the housing slowdown,” Andrew Busch at BMO Capital Markets said.
Average hourly wages, a measure of wage inflation pressures, rose 0.3 per cent in June, or six cents, to $17.38, and were up 3.9 per cent on a 12-month basis. The average workweek inched up to 33.9 hours in June from 33.8 in the prior month.
“The solid increase in both jobs and wages tells us consumers will have the income to continue spending,” said Joel Naroff of Naroff Economic Advisors.
Consumer spending fuels roughly two-thirds of US economic activity.
Some analysts suggested, however, that rising wage pressures would worry the central bank, which wants to keep so-called core inflation below two percent.
The Fed late last month held its key interest rate steady at 5.25 per cent, where it has been since June 2006.Gault said the data showed “the economy remains pretty much where the Fed wants it, with growth reviving and core price inflation edging lower, suggesting that the Fed can remain on hold for a long time.”
Others said the rebounding economy may eventually prompt the Fed to hike rates.
“The Federal Reserve will be encouraged about growth prospects, but the tightening of the labour market is a concern that will intensify in coming months,” said Stephen Gallagher of Societe Generale.
“Sustained growth near three percent will prompt declines in the unemployment rate by year-end, setting the stage for rate hikes by the Federal Reserve in the spring of 2008,” he said.
—AFP