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U.S. adds 222K jobs in June

The U.S. economy added 222,000 jobs in June and revised upward the estimated gains over the previous two months by 47,000 jobs.

Although the unemployment rate edged up slightly to 4.4 percent, June’s strong labor report likely will keep the Federal Reserve on course to begin winding down its balance sheet along with boosting short-term interest rates at least one more time this year, economists said.

employmentThe Fed has signaled that it will soon begin reducing, or tapering, its $4.5 trillion portfolio of U.S. Treasuries and mortgage-backed securities (MBS) by allowing a percentage of these each quarter to roll off its balance sheet. The reduced demand for the securities because of the Fed pullback is expected to put upward pressure on long-term mortgage rates. Most economists expect the Fed to raise the federal funds rate — which impacts shorter-term rates, such as credit card rates — by a quarter percent once more this year, and by up to four times in 2018.

“All in all, the [jobs] report signals no sense of urgency for the Fed, and should give the Fed every reason to stay the course of a gradual monetary policy normalization as it has been telegraphing to the markets,” Fannie Mae Chief Economist Doug Duncan said.

“We now expect the Fed to announce its policy to taper the balance sheet in September and hike the fed funds rate once more this year in December,” Duncan said.

Thousands of jobs were added in June in the sectors of health care (up 37,000), social assistance (23,000), financial activities (17,000) and mining (8,000). The mining sector has added 56,000 jobs since the sector hit bottom in October 2016 with the drop in oil prices. Other sectors, including the construction industry, were largely unchanged.

May’s job’s gains were revised to 207,000, up from to 174,000; and May’s figures were boosted to 152,000, up from the original estimate of 138,000.  

Over the year, the U.S. has added an average of 180,000 jobs per month, which is slightly less than the 187,000 average monthly gain in 2016, the Labor Department reported. Wages continued to move up at a modest pace. Average hourly wages rose four cents to $26.25. Wages have come up 63 cents since the start of the year, or 2.5 percent.

Hiring in the residential construction sector was disappointing. It was down for the fourth consecutive month, said Danielle Hale, managing director for housing research at the National Association of Realtors.

“More construction is needed to help slow home-price increases,” Hale said.

She noted that the annual job gains in the residential construction industry have far outpaced the aggregate gain in jobs of all sectors combined, however.

“These jobs are up 4.3 percent from a year ago—much more than 1.6 percent for all other jobs,” Hale said. “This suggests that we will continue to make slow progress on construction and increasing the inventory of homes available for sale.” 


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