WASHINGTON -- U.S. employers sharply stepped up their hiring in June, adding a robust 224,000 jobs, an indication of the economy's durability after more than a decade of expansion.
The strength of the jobs report the government issued Friday complicates a decision for the Federal Reserve late this month on whether to cut interest rates to help support the economy. Most investors have anticipated a rate cut in July and perhaps one or two additional Fed cuts later in the year. That scenario may be less likely now, analysts said.
Stocks sold off early Friday before paring their losses later. The Dow Jones industrial average closed down a modest 43 points. But the yield on the 10-year U.S. Treasury note climbed to 2.04% from just under 2% before the jobs report was released, reflecting a view that the Fed might now be less inclined to cut rates multiple times.
June's solid job growth followed a tepid gain of 72,000 jobs in May, a result that had fueled concerns about the economy's health. But with June's pace of hiring, employers have now added, on average, a solid 171,000 jobs for each of the past three months. Last month's burst of hiring suggests that many employers have shrugged off concerns about weaker growth, President Donald Trump's trade wars and the waning benefits from U.S. tax cuts.
"Although there are drags on the economy in 2019, the expansion should continue through this year," said Gus Faucher, chief economist at PNC Financial Services. "The doom and gloom was overblown."
The unemployment rate ticked up to 3.7% in June from 3.6% for the previous two months, reflecting an influx of people seeking jobs who were initially counted as unemployed. Average hourly wages rose 3.1% from a year ago.
Average hourly earnings rose 0.2% from the previous month, missing estimates, after an upwardly revised 0.3% gain, while annual wage gains held at 3.1%.
The participation rate, or share of working-age people in the labor force, increased to 62.9% as steady wage gains pulled more Americans from the sidelines and into the workforce. The average workweek was unchanged at 34.4 hours.
Trump responded to Friday's jobs report by tweeting, "JOBS, JOBS, JOBS!" But the strong hiring gains have lessened the case, at least for now, for the Fed to slash rates as Trump has repeatedly and aggressively pressed the central bank to do.
"If we had a Fed that would lower interest rates, we'd be like a rocket ship," the president told reporters in an appearance Friday.
In Friday's jobs report for June, the hiring gains were broad. Construction companies added 21,000 workers after having increased their payrolls by only 5,000 in May. Manufacturers hired 17,000, up from just 3,000 in May. Health care and social assistance added 50,500 jobs. Hiring by transportation and warehousing companies increased 23,900.
The government sector was a major source of hiring, adding 33,000 jobs in June. Nearly all those gains were at the local level.
For Todd Leff, chief executive officer of Hand & Stone Massage and Facial Spa, the resilience of the U.S. job market has provided both an opportunity and a challenge. With more Americans earning steady paychecks, demand for massages and facials has increased, and the company plans to add 60 locations this year and roughly 1,800 jobs. But the low unemployment rate has also made it hard to find and retain workers.
"We could hire 1,000 more employees today -- if they were available," said Leff, whose company has about 430 locations and is based in Trevose, Pa.
Investors have been turning their attention to the Fed, which has expressed concern about threats to the economy, especially the uncertainties from Trump's trade wars, and about inflation remaining persistently below its 2% target level. A Fed rate cut, whenever it happens, would be its first in more than a decade.
The sluggish pace of hiring in May had signaled that employers might have grown more cautious because of global economic weakness and, perhaps, some difficulty in finding enough qualified workers at the wages that companies are willing to pay.
PACE OF ECONOMY
The pace of the overall economy is widely thought to be slowing from annual growth that neared a healthy 3% last year. Consumer spending has solidified. Home sales are rebounding. But America's manufacturing sector is weakening along with construction spending. Growth in the services sector, which includes such varied industries as restaurants, finance and recreation, slowed in June.
Overall, though, employers have been adding jobs faster than new workers are flowing into the economy. That suggests that the unemployment rate will remain near its five-decade low and that the economy will keep growing, even if only modestly.
"Everyone knew the pace was going to slow," said Brett Ryan, an economist at Deutsche Bank. "The question is if it's going to slow more sharply."
The strength of the U.S. economy stands in stark contrast to weakness overseas. Data released Friday showed that German factory orders fell sharply in May, the latest sign of trouble in Europe's largest economy. The European Central Bank is widely expected to take action to stimulate the economy when it meets this month. China's manufacturing sector has likewise been struggling, in part because of tariffs imposed by the United States.
At Taco Metals, a Miami-based manufacturer of equipment for the recreational marine industry, tariffs have meant higher costs for the raw materials and parts it imports from China and other countries. That has added to fears from boat builders and dealers about how long the good times can last in an industry that is highly sensitive to the broader economy.
"The tariffs just kind of forced people to think twice about is this going to continue," said Bill Kushner, a vice president at the company. "There's starting to be more hesitation on both the manufacturing side and the dealer side."
As customers pull back, Kushner's company, which employs about 150 workers in Florida and Tennessee, is doing the same. It is holding off on some equipment purchases and waiting to fill some positions.
"It's just caused us to take a little step back and reassess some of the direction and make sure we're not jumping the gun," Kushner said. "It's like, 'Well, are we sure we're going to need to do this, or should we try to outsource?'"
However, there is little evidence that those concerns are spreading beyond manufacturing to the broader economy. Consumer confidence remains high.
Tariffs were barely a topic of conversation at a big gathering of Internet retailers in Chicago last week, said Jason Guggisberg, vice president for national accounts for Adecco, a staffing company.
"They're very optimistic about a very great second half of this year," he said. "They're going to ride this economic wave as long as they can."
Information for this article was contributed by Josh Boak of The Associated Press; by Ben Casselman of The New York Times; and by Reade Pickert, Jeff Kearns, Chris Middleton, Sophie Caronello, Ryan Haar and Katia Dmitrieva of Bloomberg News.
A Section on 07/06/2019