America’s Strong Job Market Sustains Enthusiasm About The Strength Of The Economy

The concept of a Goldilocks economic recovery was boosted by the robust job growth figures in June. Even though pundits are correct to worry about the tumultuous economic and political environment, the American economy is still neither too hot nor too cold.

While the U.S. economy created more jobs than expected in June, wage gains were also quite modest and in a stable range, suggesting that moderate inflation pressures should keep the Federal Reserve on a path of gradual interest rate increases.

A particularly appealing feature about the June data is that nonfarm payrolls increased by 213,000 and have averaged close to that level over the past three months. The monthly payroll figures were also revised up in May to 244,000 and to 175,000 in April.

The unemployment rate in June was 4% versus 3.8% in May. The U6 unemployment rate, which accounts for unemployed and underemployed workers, also increased slightly to 7.8% in June from 7.6% in May.

There was a slight increase in the labor force participation rate to 62.9% from 62.7% in May.

Average hourly earnings rose 2.7% over the twelve months ending June, identical to the May wage gain.

This rather satisfying picture suggests that the Federal Reserve will continue with its mainstream view that interest rates must be normalized (i.e. still increase further).

Of course, the June employment figures suggested a robust expanding economy before the trade war between the United States and China became fully engaged.

The U.S. is also engaged in trade fights with its other major trade partners, including Canada, Mexico, and the European Union.