US job growth signals positivity

US labour market’s rebound in June was a sigh of relief for the Federal Reserve, which is buoyed by the addition of 287, 000 jobs. The development is seen as a healthy sign of economic resilience. The job hike numbers also gave a boost to markets in the US and Europe, which have been battered down by worries that Britain’s vote to withdraw from the European Union will drag down economic growth.
The strongest hiring was seen in the health care, hospitality, information and retail sales sectors, while government hiring also picked up. The US Labour Department said the job growth in June was driven in part by stronger hiring by restaurants, retailers, and health-care providers.
This may encourage the Federal Reserve officials to keep open to raising interest rates this year. Though most Fed officials have continued to signal a desire to raise rates at least once in 2016, minutes from the Fed’s June 14-15 meeting, released on Wednesday, showed the Federal Open Market Committee “generally agreed” they needed to see more data before contemplating another hike.
Clouds over the outlook for global growth will also likely keep the officials cautious. The June minutes showed the FOMC is watching China and other emerging markets over exchange-rate and debt concerns. Since the Brexit vote, several Fed officials have said it’s too soon to tell how the decision will affect growth in Britain or the US.
It is difficult to tell, according to economists, whether job gains fall more into line with the natural growth in the labour force. A lot of people are still joining the labour force every month, either to take a job or to look for one — a sign that workers are available if employers want them.
As of June, just 62.7 percent of the population had a job or was actively seeking one — up a bit from the previous month, but still almost 5 percentage points below the 2000 peak.
“This is a good trend but nothing spectacular. It suggests that hiring has taken a step down since late last year but that job growth is still strong enough to absorb slack in the labour market,” said analysts at Nomura Global
Economics in a client note.
Markets reacted positively to the US jobs report, with the S&P 500 surging 1.5 percent to a fraction shy of an all-time record.
In Europe, Frankfurt’s DAX index gained 2.2 percent Paris’s CAC 40 added 1.8 percent, while in London the FTSE 100 barometer rose 0.9 percent. The dollar jumped and US bond yields, which had plunged in recent weeks, spiked higher. But by the end of the day, the dollar had retrenched to $1.1050 per euro, only slightly up from Thursday. And the yield on the 10-year Treasury bond fell to a new all-time low of 1.366 percent.
The employment report released by the Labour Department quells any concerns of a broader economic slowdown in the US and demonstrates beyond any reasonable doubt that the US economy is steady.