US employers hire 222K more in June

washington — US job growth surged more than expected in June and employers increased hours for workers, signs of labour market strength that could keep the Federal Reserve on course for a third interest rate increase this year despite benign inflation.

Non-farm payrolls jumped by 222,000 jobs last month, the Labour Department said on Friday, beating economists’ expectations for a 179,000 gain. Data for April and May was revised show 47,000 jobs created than previously reported.

While the unemployment rate rose to 4.4 per cent from a 16year low of 4.3 per cent, that was because more people were looking for work, a sign of confidence in the labour market. The jobless rate has dropped four-tenths of a per centage point this year and is near the most recent Fed median forecast for 2017.

The average workweek increased to 34.5 hours from 34.4 hours in May. Labour market buoyancy could also encourage the US central bank to announce plans to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgagebacked securities in September.

The Fed raised its benchmark overnight interest rate in June for the second time this year. But with inflation retreating further below the central bank’s 2 per cent target in May, economists expect another rate hike only in December.

June’s employment gains exceeded the 186,000 monthly average for 2016, reinforcing views that the economy regained speed in the second quarter after a sluggish performance at the start of the year.

But the pace of job growth is expected to slow as the labour market hits full employment. There is growing anecdotal evidence of companies struggling to find qualified workers.

As a result, companies are gradually raising wages in an effort to attract and retain their employees. Economists expect worker shortages to boost wage growth, which has remained stubbornly sluggish despite the tightening labour market.

Average hourly earnings increased four cents or 0.2 per cent in June after gaining 0.1 per cent in May. That lifted the year-on-year increase in wages to 2.5 per cent from 2.4 per cent in May.

Republican President Donald Trump, who inherited a strong job market from the Obama administration, has pledged to sharply boost economic growth and further strengthen the labour market by slashing taxes and cutting regulation.

But Republicans have struggled with healthcare legislation and there are also worries that political scandals could derail the Trump administration’s economic agenda.

The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population. — Reuters