Why higher unemployment signals a strengthening economy

Why higher unemployment signals a strengthening economy

Why higher unemployment signals a strengthening economy

The Bureau of Labor Statistics reported this morning that the economy added 213,000 jobs in June, while the unemployment rate inched a little higher, climbing from 3.8% to 4%.

The monthly Labor Department report also revised up figures for April and May, reporting that 37,000 more jobs were created in these months than previously estimated. The unemployment rate rose by 0.2 percentage point to 4.0 percent in June, and the number of unemployed persons increased by 499,000 to 6.6 million.

Wage growth remained sluggish, however, and was effectively erased by inflation: average hourly earnings rose just 0.2 percent to $26.98, putting wages up 2.7 percent over the same month past year, the same as the 2.7 percent rise in the Consumer Price Index.

The increase is above the gains required for the accommodation of the population growth and about 20,000 more compared to last year's average during the same period. Nonetheless, at 6.6 million, the number of unemployed Americans could again be smaller than current job openings.

USA non-farm payrolls increased by rose by 213,000 jobs last month, the Labor Department said today.

Private employment rose by 202,000 (median estimate 190,000) after increasing 239,000; government payrolls rose by 11,000, most since August.

Not all of those who re-entered the market were able to find jobs, which contributed to the uptick in the unemployment rate.

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Services sectors, meanwhile, lost 14,700 jobs mostly because of big decreases in accommodation and food services positions as well as wholesale and trade. And Goldman Sachs says the tight labor market tends to boost hiring in June as companies aggressively target students and graduates. Continue to look for even faster wage growth.

"This is a good job-creation number, but on the other hand we see still continued soft wage growth", said Michael Feroli, chief USA economist at JPMorgan Chase.

Workers who haven't gone to college accounted for all of this month's net increase in the labor force and employment. While improving prospects for employment and wages are helping attract people from the sidelines of the job market, the retirements of older workers are among factors that have been exerting downward pressure on participation. So, taking this all together we have a USA economy growing at around 4% in the current quarter, that has an incredibly tight labour market with headline consumer price inflation potentially rising to 3% next week.

Regina, Saskatchewan has a higher unemployment rate than Windsor, but may actually have more people working.

Higher imports in May of aircraft, other transportation equipment and energy products fuelled most of the increase. "That together with rising inflation should keep the Fed on track to raise interest rates two more times this year".

Read the full report at CNS News.

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