The US set off its own economic fireworks before the long Fourth of July weekend.
The economy added a dazzling 288,000 jobs in June, nudging the national unemployment rate down to 6.1 percent, according to the latest report from the Bureau of Labor Statistics (BLS). That was much higher than the 215,000 economists were expecting, giving the labor market its best report in six years.
Beyond the eye-catching numbers, there were other reasons for optimism nestled in the June jobs report. Here are four, plus a caveat.
1. Labor market growth is accelerating to tech-boom-levels
The jobs picture over the past year or so has been one of plodding improvement; this month’s BLS report was the first one in quite a while to really steamroll expectations. Furthermore, it continued a trend of strong labor market growth that’s been going for the past five months or so. April and May’s job gains were also revised upward, to 304,000 and 217,000, respectively. The economy has added 271,000 jobs on average for the past three months and 231,000 on average for the year,. Using either measure, that's the strongest job growth since the tech boom of the late 1990s.
Hiring improved in a wide range of sectors, including professional services, retail, and health care.
2. The winter slowdown really was a blip
In particular, the strong labor market growth over the past five months seems to have finally put to bed the idea that the slowdown in the beginning of the year was anything but an unhappy accident. “Taken as a whole, the latest five monthly jobs reports are consistent with the view that in spite of a horrendous Q1 GDP result that was the victim of a ‘perfect storm,’ of negative circumstances, the economy is well underpinned," Joshua Shapiro, the chief US economist with MFR Inc., writes in an e-mailed analysis.
All told, the number of unemployed people in the US has dropped by 2.3 million so far this year.
3. Long-term unemployment is falling
The number of workers jobless for 27 weeks or more, or “long-term unemployed,” dropped by 293,000 in June and has fallen by 1.2 million on the year. The percentage of long-term unemployed as a percentage of all jobless workers decreased to 32.8 percent – its lowest level since 2009.
4. The stock market surge continues
On the strength of the strong jobs report, the Dow passed 17,000 for the first time in its history, and it was hovering 70 points above that in midday trading. The S&P 500 is also nearing the closely watched 2,000 milestone. The growth builds on a strong year thus far and a bull market that, if it continues into August, will be the longest without a major correction in decades.
5. There’s still uncertainty
There are a few areas of uncertainty, of course. The labor force participation rate has remained flat at 62.8 percent over the past three months, a low not seen since the late 1970s. Some of that may be due to high numbers of baby boomers opting out of the workforce, but the other side of the job market, young adults, is also seeing its participation fall.
“The participation rate is at lows not seen since 1978, and therefore conditions in the labor market are certainly worse than indicated by the reported steep drop we have been seeing in the unemployment rate,” Mr. Shapiro warns. “Some of the decline is more worrisome in nature, as the participation rates of the youngest workers have been declining, which is more of a barometer of limited job prospects than of anything demographic in nature.”
The improving job market, too, is the likeliest indicator that the Fed will move to complete its tapering activities and raise interest rates sooner rather than later. JPMorgan now forecasts the Fed moving to raise interest rates in the third quarter of 2015.