U.S. Economy Added 288,000 Jobs in June; Unemployment Rate at 6.1%

Aaron Goode, 19, was recently hired by an air-conditioner maintenance company in Sunny Isles, Fla. By NELSON D. SCHWARTZ July 3, 2014

The economy accelerated in June, with employers adding 288,000 jobs, well above the rate of hiring recorded in the first five months of 2014 and another sign that growth is finally rebounding.

The Labor Department also said on Thursday that the unemployment rate fell 0.2 percentage point, to 6.1 percent, the lowest since September 2008, when the economy's fortunes turned sharply lower as Lehman Brothers collapsed and the financial crisis ensued.

Nearly six years later, some of the scars remain — like a historically low rate of Americans in the work force. But the job market has been showing signs of health, even as the overall economic growth rate has been anemic.

Unemployment has come down from 7.9 percent at the start of 2013, and the average monthly gain in payrolls has been above 200,000 for the last five months.

A job fair in Philadelphia last week.

Indeed, the gains in June were broad-based, with healthy increases in sectors ranging from manufacturing to health care, as well as financial services and transportation. Wall Street embraced the data, with the Dow Jones industrial average at the open rising above 17,000 for the first time in its intraday trading history.

The Labor Department report was well above expectations, which had been moving higher in recent days. The average gain anticipated by Wall Street economists surveyed by Bloomberg before the release stood at 215,000, with unemployment remaining flat at 6.3 percent.

Although the robust report is likely to stir talk of an earlier move than expected by the Federal Reserve to increase interest rates next year, there was little hint of accelerating wage inflation in June. Wages are up just 2 percent from the period a year earlier, essentially in line with the inflation rate today as well as the overall rate of salary increases over the last four years.

Still, the drop in the unemployment rate to near 6 percent comes months earlier than the Fed had expected; the central bank had predicted it would take until the end of the year for the rate to reach that level. The Fed's program of buying bonds to stimulate the economy is set to end in October, but most economists have been predicting the first increases in short-term interest rates would not come until the summer or early fall of 2015.

Now, some experts like Paul Ashworth of Capital Economics say the Fed could move as soon as March. That may not sound like much of a difference, but for Wall Street, the timing of the first interest rate increase after nearly six years of rates of just above zero is fraught with anxiety. In premarket trading, bond yields rose while stocks looked to open higher, a sign investors are willing to live with higher rates as long as the trajectory for future growth is on an upward slope.

The pace of hiring in recent months has been stronger despite a very weak first quarter, when the economy shrank at an annual rate of 2.9 percent. Although the weakness was initially blamed on weather, as well as more technical factors like inventory swings, the depth of the contraction caught some economists off guard, especially those who began the year with a more positive outlook for 2014.

Economic growth is thought to have picked up in the second quarter, which ended Monday, with experts estimating a growth rate of just over 3 percent in the period. The June jobs data suggests their optimism is finally at least somewhat justified. In fact, the total number of people employers are estimated to have hired in May was revised upward by 7,000, to 224,000, while the April increase was revised upward by 22,000, to 304,000.

"In short, the labor market was already showing clear improvement, but it has accelerated further in recent months," said Jim O'Sullivan, chief United States economist at High Frequency Economics. "The pace in employment is pushing the unemployment rate down rapidly."

The burst of hiring in April was the strongest monthly increase since January 2012, and is consistent with the view of economists that growth rebounded last quarter from the very slow start to the year. The three-month average rate of hiring in the second quarter now stands at 272,000, compared with 190,000 a month in the first quarter.

It also comes after some other recent indicators of labor market strength, like falling initial claims for unemployment benefits and increased optimism among businesses. On Wednesday, a private survey of payrolls by ADP showed a gain of 281,000 jobs, well above the 205,000 increase economists had been expecting for June.

The monthly jobs report typically comes on the first Friday of each month, but itwas moved up a day because the federal government is closed on Friday for the holiday.

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