All sectors saw healthy growth as jobless rate dips to 6-year low.
WASHINGTON – Five years after the recession, the job market is finally hitting stride as small businesses add workers and local governments restore battered payrolls.
U.S. employers added a robust 288,000 jobs in June across a broad spectrum of businesses, the Labor Department said Thursday. The growth flew past analysts’ forecasts and marked the fifth consecutive month of payroll gains in excess of 200,000 — a hiring spree not seen since the 1990s tech boom.
The unemployment rate dipped to 6.1 percent last month, down from 6.3 percent, the best reading since September 2008, when the collapse of Lehman Brothers turned what had been a mild recession into an economic rout.
Since then, many segments of the U.S. economy have rebounded — including corporate profits, Wall Street and the housing market — even as payrolls inched higher at a grindingly slow rate. Now, these broader economic gains are prompting businesses to hire significantly more workers in response to growing demand, rather than taking half steps, like adding hours to stretch existing workforces.
The prospect of stronger growth, with healthier consumer spending as more Americans find work, helped lift the stock market to new highs. On Thursday, the Dow Jones industrial average closed above 17,000 for the first time, while the Standard & Poor’s 500 index recorded a new high and the tech-heavy Nasdaq hit its highest level since the go-go days of 2000.
Despite the gains, the economy is still a long way from its peak before the housing bubble burst and the recession began at the end of 2007. The broadest measure of unemployment, which includes people working part time because full-time positions are not available, stands at 12.1 percent.
But the recent healthy level of hiring looks more sustainable now than it has in years. Factoring in June’s increase and upward revisions for estimated hiring in April and May, employers added an average of 231,000 workers a month in the first half of 2014, the best six-month run since spring 2006. “We’re clicking on all cylinders in terms of job growth,” said Dean Maki, chief U.S. economist at Barclays.
Just as significant as the headline figures, Maki said, is that June’s hiring was broad-based, as industries as varied as health care, manufacturing, financial services and retailing all added workers. “Every major sector showed job growth in June, including the private service sector, where the bulk of jobs in the U.S. are created,” Maki said.
In an important turnabout, there were encouraging gains not just in well-paid white collar professions, or in low-wage sectors like retail and restaurants, but also in the vast middle tier of jobs that enable workers to gain a foothold in the middle class. For example, manufacturers hired 16,000 workers, while transportation companies added 17,000 employees and the long dormant public sector saw an addition of 26,000 positions.
“It’s definitely a strong report,” said Guy Berger, an economist at RBS. “There really aren’t that many clouds.”
President Obama, who has rarely touted the monthly job numbers in his second term, hailed the report as a sign of the “enormous strides” made since the recession.
“We’ve seen the quickest drop in unemployment in 30 years,” he said during a visit to a tech start-up in Washington. He pressed Congress to promote growth by taking action on the minimum wage, immigration overhaul and the Highway Trust Fund.
Many economists had forecast that growth would shift to higher gear this year, with households positioned to spend more, businesses stretched thin on staffing, and the drag from government cutbacks having largely faded. But a slowdown in the first three months of the year raised doubts.
Thursday’s report provided evidence that the contraction in the first quarter was more a quirk of severe winter weather than a sign of fundamental economic weakness.
With growth rebounding, the June employment data are certain to raise expectations that the Federal Reserve will start to lift its benchmark short-term interest rate earlier than Wall Street had expected.
Accelerated hiring also will likely push up long-term yields and mortgage rates, which have remained unusually low despite an improving growth outlook and the Fed’s gradual pullback of its bond-buying stimulus. The 10-year bond yield went up slightly on Thursday’s jobs report.
Local governments are helping to drive the growth as they reverse cuts made as tax revenues plummeted during the recession. After shedding more than a half-million positions — many of them teachers — once-strapped schools and other agencies have stepped up their hiring this year.
Another key factor is the surging confidence of small businesses, which were hit hard by the Great Recession and housing meltdown.