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Labor secretary says more Americans are entering workforce

08 July 2018

The U.S. economy surpassed expectations in June, adding more jobs than expected even as the unemployment rate rose slightly to 4 percent.

Employment in the world's largest economy continued its brisk pace in June but the unemployment rate jumped as more people joined the job hunt, according to a government report on Friday (Jul 7). The economy added 37,000 more jobs in April and May than previously reported. As such, job creation was well ahead of the 195,000 consensus forecast, so the report really underlines the strength of the United States economy right now. This suggests renewed economic optimism among less-skilled or less-educated workers.

Manufacturers and services firms have said in recent surveys that their business is improving despite anxiety about the tariff showdown. There are also growing fears of global disruptions as a trade fight escalates between the US and China. However, the official unemployment rate increased from 3.8 percent to 4 percent, largely as a result of more people entering the workforce and actively looking for jobs. Manufacturing rose by 36,000, while the fabricated metals industry, which is at the heart of Trump's current trade battle, added 7,000 new workers.

The government said the increase in the unemployment rate came due to a rise in the labor participation rate, which increased 0.2 percentage points to 62.9 percent as 601,000 people came off the sidelines and re-entered the labor force. Initially, the agency showed a decline in May of 200 jobs as compared with the prior month. "Not only did payroll employment increase by 213,000 - evidence that employers are finding workers - but wage growth held steady at a disappointing 2.7 percent - evidence that employers are not having to raise wages to attract and retain workers". Continue to look for even faster wage growth.

The moderate wage growth should allay fears of a strong build-up in inflation pressures. Economists expect inflation will hover around its target because of labor market tightness. Wall Street welcomed the employment gains, sending the Standard & Poor's 500 up 0.9 percent on Friday.

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For Catherine Barrera, who works as the Chief Economist for online job site ZipRecruiter, reportedly said the labor force numbers quelled her concern about the unemployment figure.

The United States has increased jobs monthly for more than seven years, but some analysts suggest that the escalating trade disputes between the U.S. and its allies could threaten growth. Economists are forecasting that economic growth accelerated to an annual pace of roughly 4 per cent during the April-June quarter, about double the previous quarter's pace.

But the Trump administration's "America First" trade policy, is casting a pall over the outlook for the rest of the year and into 2019. "But enjoy the good news in the June report", Holtz-Eakin said. "Unequivocally, this is a nightmare situation". The retreat was because the continuation of strong employment prospects has caused a month-to-month uptick in the participation rate, to 62.9% from 62.7%.

Construction payrolls rose by 13,000 last month after increasing by 29,000 jobs in May. It was "general merchandise stores, including warehouse clubs and supercenters" that initiated the big cuts, -18,000 jobs.

Labor secretary says more Americans are entering workforce