Job growth surges, a sign of a reviving US economy
July 6, 2013
The US economy in June posted solid job gains for the third consecutive month, boosting confidence that a sustainable recovery is finally underway.
Employers added 195,000 jobs last month, and 70,000 more jobs in April and May than initially estimated, the US Labor Department estimated. The June unemployment rate held steady at 7.6 percent.
The US economy has created an average of 200,000 jobs a month since the beginning of the year, a marked improvement over 183,000 jobs a month in 2012 and a sign that the economy is gradually gaining momentum, said Jim O’Sullivan, chief US economist for High Frequency Economics, a forecasting firm in Vallhalla, N.Y.
“It’s certainly a healthy rate of jobs growth, more than enough growth over time to keep unemployment trending down,” O’Sullivan said. “It’s a good report — it tells you the economy is recovering.”
June’s job growth, while historically modest, was better than many economists expected. It makes it more likely that the Federal Reserve will follow through on its plan to begin withdrawing stimulus from the economy later this year by cutting back on bond purchases aimed at lowering long-term rates, analysts said.
Long-term rates, including mortgages, have risen in recent weeks in anticipation of that move.
Fed policy makers will meet at the end of this month to consider the central bank’s next steps.
Stocks wavered during trading yesterday as investors weighed an improving economy against the likelihood of higher interest rates, which will make borrowing more expensive for corporations and consumers. But an afternoon rally drove stocks higher; the Dow Jones industrial average gained 147 points to close at 15,136.
Although the pace of job growth has accelerated, it is still not fast enough to significantly lower unemployment. The jobless rate, which was 7.7 percent in February, has barely moved over the past five months — in part because more people are looking for work.
Many people who had given up job searches when the economy was struggling have resumed searches, another sign that hiring is picking up, economists said. The US unemployment rate only measures jobless Americans who are actively seeking work.
Despite nearly three years of slow and steady job gains, the nation has yet to regain all the jobs lost in the last recession; employment remains about 2 million jobs below the prerecession peak. But if the economy keeps adding 200,000 jobs a month, it will recover all the lost jobs by next year, economists said
In June, the leisure and hospitality sector, which includes hotels and restaurants, led the gains, adding 75,000 jobs. Professional and business services added 53,000 jobs last month, with increases in technology-related areas, such as technical consulting and computer systems design, which are key industries in Massachusetts.
Companies such as ROAM, a Boston firm founded eight years ago by an MIT graduate, have ramped up hiring because of surging demand for their products and services. The company, which employs about 100, sells mobile credit card readers, software, and support and is looking to fill 50 new jobs by the end of the year, said chief executive Ken Paul.
Most of the new hires will be software developers, project managers, and quality assurance workers, he said
“We’re in a sizzling hot space right now,” Paul said. “I’ve never seen anything like it.
Retail employment grew by 37,000, with the strongest gains in building material and garden supply stores and motor vehicle and parts dealers — signs of an improving housing market, growing consumer confidence, and increased consumer spending.
“People have figured out this economy does have legs, and we don’t have a lot of weakness,” said John Silvia, chief economist at Wells Fargo Bank. “It’s really pretty solid.”
Still, recovery remains out of reach for millions of Americans. The number of people employed part time, because their hours had been cut or because they were unable to find full-time work, increased by 322,000 to 8.2 million in June.
Economists view this as a sign that the economy remains weak, unable to generate enough full-time jobs. In addition,long-term unemployment remains stubbornly high: Some 4.3 million Americans in June had been unemployed for six months or more.
Harry Holzer, a public policy professor at Georgetown University and author of the book “Where Are All the Good Jobs Going,” said many long-term unemployed end up retiring early or dropping job searches.
Research has shown that the longer a person is unemployed, the more difficult it is for them to find work. Their skills can atrophy and employers discriminate against them. Holzer said politicians have had difficulty devising policies to help this group because of the deep partisan divide in Congress over budget priorities.
“No one talks about it, which is unfortunate,” Holzer said of the long-term unemployed, noting that the current pace of job growth remains too slow to help them. “It’s still an employers’ market, a buyers’ market.”