Rosy labor statistics jolt market
Washington — STOCKS and bonds went reeling Friday after the government released unexpectedly positive labor market statistics, which investors worried could lead to higher interest rates. By the end of the day, however, financial markets had recovered.
The unemployment rate remained stable at 6 percent in June, the Bureau of Labor Statistics reported. New payroll jobs topped 374,000, nearly 50 percent more than in May.
More than three-quarters of the gain was attributed to jobs in the service and retail sectors. The manufacturing sector, meanwhile, continued a nine-month growth trend with an increase of 34,000 jobs.
The Federal Open Market Committee, which formulates policy for the Federal Reserve, announced Wednesday that interest rates would remain steady. But on Thursday, the yield of the 30-year US Treasury bond began rising quickly in anticipation that the labor report would persuade the Fed to change its mind.
The June labor statistics may have been boosted artificially by the lengthened five-week period of the survey. The job picture was also brightened by the World Cup soccer tournament being played in stadiums around the country, which has created temporary employment in the food service and security sectors.
From February to May, the Fed boosted short-term rates 1.25 percent, the effects of which were visible in the labor report. The construction sector added a modest 16,000 jobs in June, down from a monthly average of 31,000 this year. The downturn was attributed to the Fed's earlier rate hikes.
While the aggregate employment numbers are encouraging, the distribution of employment remains uneven. ``Both the 11.2 percent unemployment rate for African Americans and the 10.3 percent rate for Hispanics would be considered a severe recession for the economy as a whole,'' says Congressman Kweisi Mfume (D) of Maryland, chairman of the Joint Economic Committee.