WASHINGTON (AP) — U.S. employers are sending a message of confidence in the economy — hiring more workers, raising pay and making the job market appear strong enough for the Federal Reserve to slow its bond purchases as early as September.
The economy gained a robust 195,000 jobs in June and many more in April and May than previously thought. The unemployment rate remained 7.6 percent in June because more people started looking for jobs — a healthy sign — and some didn’t find them. The government doesn’t count people as unemployed unless they’re looking for work.
The Labor Department’s report Friday pointed to a U.S. job market that’s showing surprising resilience in the face of tax increases, federal spending cuts and economic weakness overseas. Employers have added an average 202,000 jobs for the past six months, up from 180,000 in the previous six.
The job growth is being fueled in part by consumer spending and the housing recovery. Consumer confidence has reached a 5½ year high and is helping drive up sales of homes and cars. Hiring was especially strong in June among retailers, hotels, restaurants, construction companies and financial services firms.
“The numbers that we’re seeing are more sustainable than we thought,” said Paul Edelstein, U.S. economist at IHS Global Insight, a forecasting firm. “We’re seeing better job numbers, the stock market is increasing and home prices are rising.”
Average pay also rose sharply last month. It’s exceeded inflation this year after barely keeping pace since the Great Recession ended four years ago. Average hourly pay rose 10 cents in June to $24.01. Over the past 12 months, it’s risen 2.2 percent. Over the same period, consumer prices have increased 1.4 percent.
Stocks surged Friday. The Dow Jones industrial average jumped 147 points, nearly 1 percent. The yield on the 10-year Treasury note soared to 2.73 percent, its highest point since August 2011, from 2.51 percent late Wednesday. That’s a sign that investors think the economy is improving and that the Fed will slow its bond buying this year. If it did, long-term rates would likely rise.
Among the employers benefiting from Americans’ continued willingness to spend is Carlisle Wide Plank Floors, based in Stoddard, N.H. Carlisle makes hardwood flooring used in stores, restaurants and hotels. CEO Michael Stanek said orders jumped 30 percent in the first quarter compared with a year earlier.
The company is hiring factory, sales and administrative employees to meet the higher demand. Carlisle expects to add about 15 employees this year to its 85-person workforce.
Friday’s report showed that the U.S. economy added 70,000 more jobs in April and May than the government had previously estimated — 50,000 in April and 20,000 in May.
The Fed has been buying $85 billion in Treasury and mortgage bonds each month since late last year. The purchases pushed long-term interest rates to historic lows, fueled a stock rally and encouraged consumers and businesses to borrow and spend. The low rates have helped support an economy that’s had to absorb government spending cuts and a Social Security tax increase that’s shrunk paychecks this year.
John Silvia, chief economist at Wells Fargo, said he thinks the Fed will announce at its September policy meeting that it will start reducing its bond purchases, perhaps to $75 billion a month.
Chairman Ben Bernanke has said the Fed’s bond buying could end around the time unemployment reaches 7 percent. The Fed foresees that happening around mid-2014. But Silvia said he didn’t think unemployment would reach 7 percent by then. He thinks the Fed could continue its bond buying into 2015.
Friday’s report contained at least one element of concern: Many of the job gains were in generally lower-paying industries, a trend that emerged earlier this year. The hotels, restaurants and entertainment industry added 75,000 jobs in June. This industry has added an average 55,000 jobs a month this year, nearly double its average in 2012. Retailers added 37,000. Temporary jobs rose 10,000.
The health care industry added 20,000 jobs, construction 13,000. But manufacturing, which includes many higher-paying positions, shed 6,000. The manufacturing sector has weakened this year, in part because struggling economies in Europe and elsewhere have reduced demand for U.S. goods.