June jobs report may help clarify a muddy economic picture
WASHINGTON (AP) — With the U.S. and global economic outlook unusually cloudy, Friday’s jobs report for June will produce one of the most anticipated economic figures of the year.
Was a sharp slowdown in U.S. hiring during April and May just a temporary blip? Or did it signal a broader economic slump?
How long will the Federal Reserve delay its next interest rate hike? How will the United Kingdom’s unsettling vote to leave the European Union affect the U.S. and global economies?
Friday’s figures won’t answer all those questions. The report will show the job growth and the unemployment rate for last month. The U.K.’s “Brexit” vote occurred June 23, too late in the month to have had an impact on the U.S. employment figures.
Still, the data will provide some critical insight into the U.S. economy’s health. Analysts have forecast that employers added a solid 180,000 jobs last month, according FactSet, an information service. The unemployment rate is expected to tick up to a still very low 4.8 percent from 4.7 percent.
If it turns out that employers did add nearly 200,000 jobs in June, it would mark a reassuring turnaround from a dismal May, when they added just 38,000, the fewest in more than five years. Over the past three months, job growth has averaged only 116,000 — half the average monthly gain of last year.
“I believe last month was an outlier that’s not likely to repeat this month,” said Andrew Chamberlain, chief economist at Glassdoor, an employment website.
The number of Americans applying for unemployment benefits remains unusually low, Chamberlain noted, and companies continue to advertise a healthy number of job openings.
But the recent hiring slump comes after the U.S. economy grew at a tepid 1.1 percent annual rate in the first three months of the year. Americans’ spending rose at the slowest pace in two years during that time — a significant drag given that consumer spending drives around 70 percent of the economy.
Concerns about the global economy have deepened since the Brexit vote, which sent financial markets gyrating. The yield on the 10-year U.S. Treasury note this week touched a record low of 1.34 percent.
Such a decline has historically signaled anemic growth and even an outright recession. When investors fear for the future and seek safe returns for their money, they typically shift into U.S. Treasurys. That flow of money forces down yields.
The hiring slowdown caught Federal Reserve officials off guard. They cited the weak jobs figures during their June meeting as a key reason for putting off any further rate increases.
“The surprisingly weak May employment report increased (Fed policymakers’) uncertainty about the outlook for the labor market,” the minutes of the Fed’s June 14-15 meeting said.
That sentiment signaled a shift from their April meeting, when many Fed policymakers had indicated that they were prepared to raise rates as soon as June if the job market and the economy continued to improve.
Most recent economic data have pointed to an improvement from the sluggish start to the year, though all of it pre-dates the Brexit vote. Americans, for example, ramped up their spending in April and May, and measures of consumer confidence also grew. The stronger spending has led economists to forecast that annualized growth rebounded to 2 percent or more in the April-June quarter.
Manufacturing companies expanded in June at their fastest pace since November, according to a survey by the Institute for Supply Management, a trade group. Services companies, including retailers and banks, also grew at a faster pace in June, the ISM found.
And home sales have marched upward this year despite a low supply of houses for sale. Sales of existing homes reached a nine-year high in May.
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