Hiring has broken out to a new, higher level as employers added a better-than-expected 195,000 jobs in June and the prior two months were revised upward, the government said Friday, in a firecracker of a report.
Most mainstream economists had expected June jobs in the range of 150,000 to 175,000, so the latest reading of a key economic indicator was a positive surprise. The Labor Department also revised upward the prior two months, noting that April's 149,000 jobs estimate actually was 199,000 new jobs, and May's 175,000 really was 195,000.
"This is a very solid report," said Mark Zandi, the chief economist for forecaster Moody's Analytics. "In addition to the solid job gains, it is also encouraging that hours worked per week remain high, which is a positive leading indicator for jobs, and hourly earnings growth is holding up."
Added Scott Anderson, the chief economist of San Francisco-based Bank of the West, "The June payroll figures did not disappoint, coming in far better than analysts expected. The jobs recovery is finally starting to join the rest of the economic expansion."
The numbers come on top of improving home sales, stronger consumer sentiment, and sizzling car sales. Over the past six months, hiring has averaged almost 202,000 a month, a rate that will begin bringing down the jobless rate if it continues.
Despite all this improvement, most predictions of the gross domestic product — the sum of goods and services in the U.S. economy — remain subdued. It points to an economy that's getting its mojo back but still has a way to go. "I still don't think the job market is off and running. Real GDP growth has slowed meaningfully so far this year, and this should show up in softer job growth in coming months," Zandi cautioned. "The weak global economy is hurting manufacturing exports and jobs, and government layoffs remain a significant drag."
In fact, manufacturers shed 6,000 jobs in June, after several months of sluggish hiring.
"This was the fourth-straight month of declining manufacturing employment, continuing hiring weaknesses in the sector that we have seen since mid-2012. Over the course of the past 12 months, the sector has added just 29,000 net new workers, or 1.3 percent of all of the 2.3 million nonfarm jobs added during that time," Chad Moutray, the chief economist of the National Association of Manufacturers, observed in his blog Shopfloor.org.
The unemployment rate held steady at 7.6 percent last month, even after what now is three solid months of hiring. That's in part because workers who had given up are coming back to look for jobs, making the labor-force participation rate rise to 63.5 percent in June from 63.3 percent in May, an important move given the size of the U.S. economy.
"Not necessarily a bad thing, but it could keep the unemployment rate elevated for a long time despite the better numbers," Anderson said.
The one sign of trouble in Friday's report was a big jump in the number of discouraged workers and people who were working part time for economic reasons. This jump drove up the gauge of "underemployment" by half a percentage point.