Washington, DC, July 2--Employers hired workers at a lackluster pace for the first time in four months in June, surprising Wall Street.
Nonfarm business payrolls grew by a net 112,000 jobs in June, raising this year's total to slightly more than a million, the Labor Department said Friday.
But last month's growth was well below the 150,000 job gains per month that economists say is necessary to keep the job market stable. And economists had expected this report to show 250,000 jobs added to the payrolls in June, according to a survey by Dow Jones Newswires and CNBC.
In addition, employers also added 35,000 fewer jobs than previously thought in April and May. The job creation nevertheless drew previously discouraged workers back into the civilian labor force, expanding it by 305,000 to 147.3 million. The unemployment rate, as a result, held steady at 5.6%.
For the last few months, forecasters had been confident the economy would generate at least 200,000 jobs a month for the remainder of the year -- a pace that would restore nearly all of the 2.7 million jobs cut from 2001 to mid-2003.
The strength of the job-market recovery until now -- and the uptick in inflation that has accompanied it -- this week prompted the Federal Reserve to raise interest rates for the first time in four years. The central bank lifted its key federal-funds rate by a quarter percentage point to 1.25% and indicated that more increases of that magnitude are likely this year.
Wall Street widely expects the funds rate to climb to 2.25% by the end of the year. Some analysts worry that might not be enough to keep inflation from surging out of control. Research by Fed economists, however, has suggested that the job market was so weakened by the downturn of the last few years that it is unlikely to generate much inflation before 2006.
In a briefing to the directors of Federal Reserve Bank of Boston recently, a group of economists at that bank argued that the U.S. economy currently may be as many as 5.2 million jobs short of the "full employment" level that Congress requires the Fed to try to achieve.
To close that gap, employers would need to add an average of 346,000 jobs a month until January 2006, the economists said. So far this year the monthly average has been 171,000. Some Fed policymakers have cited similar numbers to make the case that the Fed can afford to raise interest rates gradually over the next year or so.
In its report Friday, the Labor Department revised its estimates of job growth for April and May, saying employers added 324,000 jobs in April and 235,000 in May. Previous estimates had shown a 346,000 increase in April and a 248,000 increase in May.
The report showed the manufacturing industry cut jobs for the first time since January, trimming payrolls by 11,000. The government cut jobs for a second month in a row, reducing payrolls by 5,000.
The service-producing industry added 122,000 jobs. That included a 39,000 increase in professional and business-services jobs, which include temporary-help jobs. Payrolls in the construction industry were unchanged.
The jobs growth coincided with a minuscule increase in average hourly earnings, which rose two cents to $15.65 in June. Wage gains moderated in annual terms in June: the increase last month was 2%, down from 2.2% in the year through May. The average workweek declined for the first time since April, falling 12 minutes to 33.6 hours.
The Labor Department said 8.2 million people remained unemployed -- the same as in May, the Labor Department said. The number of people who have been jobless for 27 weeks or more remained steady at 1.8 million.
