Solid hiring expected for June as US job market nears normal
WASHINGTON (AP) — U.S. employers likely hired at another strong pace in June, a sign that the job market is nearing full health and giving the Federal Reserve reason to raise interest rates as early as September.
Economists predict that employers added 233,000 jobs and that the unemployment rate dipped to 5.4 percent from 5.5 percent in May, according to data firm FactSet.
The June employment report will be released at 8:30 a.m. Eastern time Thursday.
For the first five months of 2015, monthly job growth has averaged 217,000, a healthy streak that is steadily absorbing the unemployed as well as part-time workers looking for more hours.
The job gains are also showing tentative signs of finally forcing up wages, which have remained stagnant for many Americans during the 6-year-old economic recovery. Pay is now rising for some because employers have been forced to offer higher wages to attract qualified employees.
Those trends have raised economists' expectations that the Fed will soon raise the key short-term rate it controls in September or, if not, in December. The Fed has kept that rate at a record low near zero for 6½ years to support the economy. A Fed rate hike would lead to higher rates for mortgages, auto loans and other borrowing.
In May, many more Americans started seeking work. Even though employers added a robust 280,000 jobs in May, they weren't enough to fully absorb the influx of job seekers. As a result, the unemployment rate rose a notch to 5.5 percent.
Still, a surge in people looking for work is a healthy sign because it suggests rising optimism about job prospects. Assuming that most of the new job seekers eventually find work, the rise in employment levels should eventually accelerate consumer spending and economic growth.
Strong hiring has endured this year despite a miserable winter, which helped cause the economy to contract 0.2 percent at an annual rate in the January-March quarter.
Patrick O'Keefe, an economist at the accounting and consulting firm CohnReznick, says the job gains show that employers are increasingly confident that their customer demand will keep growing. Their willingness to hire in anticipation of greater demand marks a shift from earlier in the economic recovery, when many businesses tended to hire only when essential.
"They've gone from being reactive, where they would hire only after their current workforce was maxed out, to anticipatory," O'Keefe said. "They need more employees to keep up with future demand."
A survey of purchasing executives at manufacturing firms released Wednesday echoed that view: It found that factories reported a scant rise in orders in June but ramped up hiring anyway. Bradley Holcomb, chairman of the Institute for Supply Management's manufacturing business survey committee, said that trend shows that manufacturers foresee orders rising in coming months.
Americans are finally spending more after boosting their savings earlier this year, in part because they're growing more confident about the economy. The Conference Board said Tuesday that its consumer confidence index reached 101.4, matching March's figure for the second-highest level since the recession.
That's good news for auto dealers and real estate agents. Auto sales jumped to nearly a 10-year high in May. The National Automobile Dealers Association forecasts that sales will top 17 million this year for the first time since 2001.
And home sales are running at an eight-year high and boosting construction. Permits to build homes jumped 11.8 percent in May to the highest level since 2007.
Most economists now expect economic growth to reach an annual rate of 2.5 percent in the April-June quarter and 3 percent in the second half of the year.