U.S. job growth gains momentum

The economy added a better-than-expected 195,000 jobs in June, the Labor Department reported Friday, pointing to healthier growth.

Wall Street has been feverishly awaiting the June employment report. Not only does it provide another indicator of overall economic strength, it also affects the timing of the Federal Reserve's decision to start easing back on a major part of its stimulus efforts.

Experts on Wall Street had been expecting the economy to add 165,000 jobs in June, so the better-than-expected monthly number, along with upward revisions in the number of jobs created in April and May, makes it more likely the Fed will begin stepping back in the coming months. In the first half of 2013, a better indicator than the one-month snapshot, the economy added 202,000 jobs a month, up from the 183,000 monthly pace in 2012.

"The economy continues to show some momentum," said Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch.

Along with job creation, the Fed is closely watching unemployment levels. The unemployment rate, which is based on a separate survey from the one that tracks jobs, remained at 7.6 percent, unchanged from May.

The chairman of the Federal Reserve, Ben Bernanke, said two weeks ago he anticipated the bond-buying program would wrap up when the unemployment rate sinks to 7 percent. The Fed estimates that could happen by the middle of next year.

If the job market continues to improve, and other indicators like manufacturing activity and consumer spending remain healthy, the central bank could begin scaling back the stimulus program as early as September, Meyer said.

Other analysts echoed Meyer's view.

"This was a solid report and it will be seen by the Fed as fully consistent with tapering in September," said Dean Maki, chief U.S. economist at Barclays. In addition, Maki noted, average hourly earnings rose 2.2 percent year-over-year, close to a high for the current recovery.

In early trading Friday, stocks rose slightly while bond yields jumped — another sign traders are betting on a move by the Fed sooner rather than later. Bond yields have surged in the past six weeks, and while that is typical when the economy is improving, it also pushes mortgage rates higher, a concern for home buyers.

While the economy has held up better than some analysts had expected in the face of tax increases and automatic cuts in federal spending this year, overall growth in economic output has been tepid. The economy grew at an annual rate of 1.8 percent in the first quarter, short of what's needed to quickly lower the unemployment rate or reduce the ranks of the jobless.

Another factor holding back strong job growth has been a steady drop in public employment. In June, private employers added 202,000 positions, while state, local and federal governments shed 7,000 workers.

In Friday's report, the Labor Department revised upward the prior two months, noting that April's 149,000 jobs estimate was actually 199,000 new jobs, and May's 175,000 was really 195,000.

Still, for unemployed workers, the odds of finding a job remain daunting. Since he was let go by an electronics company in November, John Vretis has made it through the first and second cut of applicants at several companies near his home in Moline, Ill.

But Vretis has yet to get an offer. He recently interviewed at a metals company that is adding 25 workers a month, but was told it had 4,000 applicants for those positions.

"I'm 55 and I know that's an issue," said Vretis, who holds an associate degree in accounting. "When people see me, they think 'This guy might be too old.' "

Amid the competition, Vretis has broadened his search. He earned $17 an hour at his old job, but he said he's now willing to work for as little as $9 an hour.