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Updated: U.S. Economy Creates 288,000 Jobs In June

By Kitco News
Thursday July 3, 2014 8:30 AM

Editor's Note: The article was updated to include more information from the report and comments from CIBC, TD Securities.

(Kitco News) - The U.S. labor market and the economy continued to build momentum as 288,000 jobs were created in June , according to the latest data from the U.S. Labor Department.

Most forecasters were optimistic ahead of the data; according to consensus estimates, economists  expected that between 214,000 and 230,000 jobs were created last month.

"Job gains were widespread, led by employment growth in professional and business services, retail trade, food services and drinking places, and health care," the report said.

Along with the headline figures, market participants said they are also paying close attention to revisions. May’s numbers were revised to 224,000 up from the previous reading of 217,000 jobs.

April's employment figures were revised to 304,000. Prior revisions in May had April's job gains at 282,000.

According to reports, April's revision is the biggest increase in nonfarm payrolls in more than two years. Year-to-date, the economy has gained an average of 231,000 jobs per month.

The Labor Department also said the unemployment rate was 6.1%, down from May’s reading of 6.3%. The consensus estimates called for the unemployment rate to remain steady at 6.3%. The participation rate remained unchanged at 62.8%.

Economists are also paying attention to average hourly earnings as an indication of rising inflation. According to the report, average hourly earnings rose by six cents in June to $24.45; over the past 12 months average hourly earnings have increased by 2.0%. The average work week remained unchanged for the fourth straight month at 34.5 hours.

Andrew Grantham, senior economist at CIBC World Markets, explained the June report showed the labor market strengthened across the board in the last few months. Not only did June’s nonfarm payrolls beat expectations, but the higher revision that showed 29,000 new jobs were created in May and April, he said.

“On top of that, an even larger increase in employment on the household survey meant that the unemployment rate dipped to 6.1%, from 6.3%, even with the participation rate holding steady,” he said.

However, Grantham did note some concern with wage gains in the report.

“One ongoing concern for the Federal Reserve will be the weakness in earnings, which are still running at a tepid 2.0% year-over-year rate despite recent strong hiring and significant declines in the unemployment rate seen recently,” he said.

A larger-than-expected jump in private sector employment Wednesday, created strong last minute optimism ahead of Thursday’s data. Payrolls processor ADP said 281,000 jobs were created last month, well above May’s report of 179,000 and above expectations, which were around 200,000.

Economists aren’t alone in their optimism that the U.S. labor market and economy are back on the road to recovery after a dismal first-quarter performance. On June 18, following its monetary policy meeting, the Federal Reserve said they continue to see signs of improvement in the labor market.

Millan L. Mulraine, deputy head of U.S. research and strategy for TD Securities, said June’s “stellar” employment report could be the start of improving economic data across the board. “That should point to the U.S. recovery successfully transitioning to a self-sustaining path later this year, which should provide the key justification for the Fed (Federal Reserve) to begin pivoting away from it uber-accommodative stance,” he said.

Although risks are rising that the Fed will hike rates earlier than expected, Mulraine added they are not expecting the central bank to tighten its monetary policy until the second half of 2015 as there is still slack in the economy and inflation pressures remain subdued.

By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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