Hiring Is Strong and Jobless Rate Declines to 6.1%



American companies are finally getting comfortable enough with the economy’s prospects to add new workers at a very healthy pace, after years of saying they lacked the confidence to hire people aggressively during a fitful recovery.

Employers added 288,000 jobs in June, the Labor Department said Thursday, the fifth month in a row that hiring has topped the 200,000 mark. The unemployment rate dipped to 6.1 percent last month, the best reading since September 2008, when the collapse of Lehman Brothers turned what had been a mild recession into an economic rout.

Since then, many segments of the economy have rebounded — including corporate profits, Wall Street and the housing market — even as payrolls inched higher at a grindingly slow rate. Now, these broader economic gains are prompting businesses to actually hire significantly more workers in response to growing demand, rather than taking half steps, like adding hours to stretch existing work forces.


The prospect of stronger economic growth, with healthier consumer spending as more Americans find work, helped to lift the stock market to new highs. On Thursday, the Dow Jones industrial average closed above 17,000 for the first time, while the Standard & Poor’s 500-stock index recorded a new high and the tech-heavy Nasdaq hit its highest level since the go-go days of 2000.

Despite the broad gains, the economy is still a long way from its peak before the housing bubble burst and the recession began at the end of 2007. The broadest measure of unemployment, which includes people who are working part time because full-time positions are not available, stands at 12.1 percent. And the proportion of Americans in the labor force has been stuck for three straight months at 62.8 percent, a 36-year low, and is down sharply from 66 percent in 2008.

But the recent healthy level of hiring looks more sustainable than it has in years. Factoring in June’s increase and upward revisions for estimated hiring in April and May, employers added an average of 231,000 workers a month in the first half of 2014, the best six-month run since the spring of 2006. “We’re clicking on all cylinders in terms of job growth,” said Dean Maki, chief United States economist at Barclays.

Just as significant as the headline figures, Mr. Maki said, is that June’s hiring was broad-based, as industries as varied as health care, manufacturing, financial services and retailing all added workers. “Every major sector showed job growth in June, including the private service sector, where the bulk of jobs in the U.S. are created,” Mr. Maki said.


In an important turnabout, there were encouraging gains not just in well-paid white-collar professions, or in low-wage sectors like retail and restaurants, but also in the vast middle tier of jobs that enable workers to gain a foothold in the middle class. For example, manufacturers hired 16,000 workers, while transportation companies added 17,000 employees and the long-dormant public sector saw an addition of 26,000 positions.

“It’s definitely a strong report,” said Guy Berger, United States economist at RBS. “There really aren’t that many clouds.”

Despite the stock market jump, the more robust rate of hiring is making some traders nervous that the Federal Reserve will be forced to start raising short-term interest rates earlier than had been expected to ward off any risk of higher inflation. The drop in the unemployment rate to near 6 percent comes months earlier than the Fed had expected; the central bank had predicted it would take until the end of the year for the jobless rate to reach that level.

While the Fed’s program of buying bonds to stimulate the economy is on track to end in October, most economists have been predicting the first increases in short-term rates would not come until the summer or early fall of 2015. Now, some experts like Paul Ashworth of Capital Economics say the Fed could move as soon as March.

Despite such concerns, there was little hint of accelerating wage inflation in the data in June, a crucial trend that the Fed watches to gauge the broader danger of higher inflation. Wages are up just 2 percent from the period a year earlier, in line with the inflation rate today as well as the overall rate of salary increases over the last four years.

Some of the recent job gains represent a catch-up for employers that put off hiring during a bumpy 2013. The initial weakness in the first quarter of 2014 delayed it further, as the economy shrank 2.9 percent during a bitter winter and a downward swing for inventories.

Roger Hargens, chief executive of Accumold, an Ankeny, Iowa, maker of small, highly specialized components for medical device firms and other manufacturers, had hoped to begin hiring more aggressively last year. But after the delay of a big order last fall, he waited instead.

The last few months have been strong enough to persuade him to take the plunge. Orders in June hit their best level ever, with much of the demand coming from overseas customers. Accumold’s products include the exterior plastic shells of hearing aids, as well as the tiny tools used by doctors to remove cataracts or perform laparoscopic surgery.

Accumold added three workers last month at its facility in the Des Moines suburbs, and the company plans to hire another 10 to 20 employees in the second half of the year, bringing the total work force to just under 200 people. By the end of 2015, Mr. Hargens hopes to employ 220 to 230 people at his company, where the typical production worker earns about $17 an hour while people with technical expertise often make at least $25 an hour.

“We’re starting to scale up in a big way,” said Mr. Hargens, who is heading to Europe on Monday to meet with customers in Switzerland, France and Britain. “We had to hold off, but now we’re back on track.”

As the story of Accumold suggests, the 70 million American workers with a high school diploma or some college, who make up the largest group in the work force, are finally seeing some of the gains only college graduates had enjoyed earlier in the recovery.

Unemployment among high school graduates fell to 5.8 percent in June from 6.5 percent a month earlier, and joblessness among people with some college or an associate degree fell to 5 percent, from 5.5 percent in May. The unemployment rate among college graduates increased 0.1 percentage point to 3.3 percent.

Mr. Maki, the Barclays economist, said that among workers with only a high school diploma, employment was actually falling at this point in 2013 by 16,000 a month on a yearly basis. Now, he said, employers are adding 29,000 high school graduates a month.

“We’re seeing more significant gains among those who have less than a college degree,” Mr. Maki said. “The trend is beginning to shift.”



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