The unemployment rate dipped in June to its lowest level in nearly four years as employers expanded payrolls modestly, a sign that the nation’s job market is plugging — not powering — ahead. Wall Street rallied.
The latest employment snapshot from the Labor Department on Friday supported the view of Federal Reserve Chairman Alan Greenspan and his colleagues that the economy is in good shape and the labor market is gradually improving despite high energy prices.
The civilian unemployment rate dropped to 5 percent in June, down a notch from 5.1 percent in May and the lowest since September 2001. The jobless rate has drifted downward after hitting 6.3 percent in June 2003, its highest point during the economic recovery.
Payroll growth, on the other hand, has been choppy from month to month. Employers added 146,000 new jobs in June, up from 104,000 in May.
“A lean, mean jobs machine this economy is not,” said Joel Naroff, president of Naroff Economic Advisors. “But jobs are being created and the unemployment rate is falling so you really cannot complain too much.”
Although economists were forecasting a more robust gain — of around 195,000 jobs — for June, their disappointment was tempered by what turned out to be better job growth in April and May. Employers added 44,000 more jobs in those two months combined than the government had previously estimated, according to revised figures released Friday.
On Wall Street, investors buoyed by the jobs news said it suggested the economy is advancing at a modest pace that won’t fan inflation. The Dow Jones industrials soared 146.85 points to close at 10,449.14.
For the first half of this year, job growth has averaged 181,000 a month, close to the average 183,000 jobs created each month in 2004. “That’s an amazingly steady and healthy pace,” said Stuart Hoffman, chief economist at PNC Financial Services Group. “Is 180,000-plus jobs a month great? No. It is good and solid? Yes.”
Wanting to keep inflation in check, the Federal Reserve boosted a key interest rate by one-quarter percentage point to 3.25 percent last week. In doing so, Fed policymakers said: “Although energy prices have risen further, the expansion remains firm and labor market conditions continue to improve gradually.”
Oil prices, which surged to a new closing high of $61.28 a barrel on Wednesday, retreated a bit and settled at $59.63 a barrel on Friday.
Given the labor market’s gradual improvement, the Fed probably will stick with its approach of modest, quarter-point interest rate increases this year to prevent high energy prices from stoking broader inflation.
Different views of the market
Republicans and Democrats differ on how the economy and the job market are faring.
The Bush administration’s top economic point person, Treasury Secretary John Snow, pointed to the latest employment figures as evidence that the “fundamentals of our economy are strong and that we are continuing on a positive path of growth.”
But Sen. Jack Reed of Rhode Island, a top Democrat on Congress’ Joint Economic Committee, countered: “Another month of disappointing job growth ... means the economic benefits of this recovery are not being broadly shared with American workers.”
AFL-CIO President John Sweeney, meanwhile, lamented the continued loss of factory jobs, contending that such work “helped to create our nation’s middle class.”
Manufacturers cut jobs in June for the fourth month in a row, shedding 24,000. Most of those cuts came from the automobile industry, which has scaled back production and offered promotions to sell off excess inventories and entice buyers.
Job losses in manufacturing were more than offset by job gains in professional and business services, in education and health services, leisure and hospitality, financial activities and retail.
The average time that the unemployed had spent searching for work in June was 17.1 weeks. That marked an improvement from the average 18.8 weeks registered in May and was the shortest duration since August 2002.
Workers’ average hourly earnings, which aren’t adjusted for inflation, rose to $16.06 in June. That’s 2.7 percent higher than the same month last year, a pace that should help support consumer spending, the economy’s lifeblood, analysts said.
“Goldilocks — aka Greenspan — should like this jobs report for it depicts an economy that is running neither too hot nor too cold,” said Ken Mayland, president of ClearView Economics.