The number of Americans in work has surpassed the pre-recession peak, recording four straight months of growth above 200,000 for the first time in 14 years, as the world’s largest economy bounces back.
Jobs growth of 217,000 came in slightly above expectations of 213,000 and the unemployment rate held steady at 6.3 per cent. Employment finally surpassed its 138.4m peak of January 2008 – a symbolic moment in the US’s recovery from the Great Recession – but with population growth of millions since then jobs remain far below their pre-recession trend.
The milestone highlights the depth of the recession and the exceptionally slow pace of recovery. It has taken more than six years to reach a new high in employment – twice as long as any other postwar recovery – in an economy scarred by excessive household debt and a tightening fiscal policy.
But the latest jobs numbers do add to the picture of an economy that has bounced back from a weather-induced slowdown earlier in the year, and is now expanding steadily, although not accelerating to a rapid pace of growth.
“Overall, this was a very strong report with no obvious warts to detract from the underlying message of sustained improvement in economic activity,” said Millan Mulraine at TD Securities in New York.
It will not raise any alarms at the US Federal Reserve. With robust job creation, and modest wage rises of 0.2 per cent over the previous month, it is likely to stick to its current course and taper asset purchases by another $10bn to $35bn a month when it meets the week after next.
But one surprise was the low unemployment rate. It had been expected to rise a little in May, after a plunge the previous month, but it did not because there was no surge of workers back into the labour force. The participation rate held steady at 62.8 per cent – its lowest since the late 1970s.
That is less encouraging for the Fed, because if people do not come back into the jobs market it will suggest there has been permanent damage from the slow recovery, with workers losing the skills they need to find employment.
In that case, there may be less spare capacity in the economy than the Fed thinks. That could force the central bank to raise interest rates earlier than it plans.
There were modest downward revisions to previous data, knocking off 6,000, but average hourly earnings were up 2.1 per cent on a year ago.
There is a sizeable margin of error for the initial jobs release. For the monthly jobs creation estimate, the error band is plus or minus 90,000 jobs, while for the unemployment rate it is plus or minus 0.2 percentage points.
Almost all of the jobs growth came from the private services sector, with business services adding 55,000 positions, healthcare creating 54,900 new jobs and 39,000 new positions in the leisure sector. Construction added just 6,000 jobs – reflecting the recent lull in the housing sector – and manufacturing put on 10,000 positions.