Steady Job Gains Could Further U.S. Economic Recovery

jobs employment economic recovery umemployment manufacturing
M. Spencer Green/AP
WASHINGTON -- Another solid month of hiring in June could signal the start of a stronger second half of the year for the U.S. economy.

Economists predict that the government will report Friday that employers added 165,000 jobs last month, roughly in line with May's increase. The unemployment rate is expected to stay at a still-high 7.6 percent.

The Labor Department will release the employment report at 8:30 a.m. ET Friday.

The job market and the economy have proved surprisingly resilient this year. Hiring and consumer confidence have remained steady despite higher taxes and federal spending cuts.

Further job growth could lower the unemployment rate and help the economy rebound after a weak start this year. If growth accelerated and unemployment fell, the Federal Reserve might start to scale back its bond purchases before the year ends. The bond purchases have kept long-term interest rates low.


Several reports Wednesday suggested that hiring remained solid in June, though perhaps not enough to reduce unemployment. Payroll provider ADP said businesses added 188,000 jobs in June, the most since February. Applications for unemployment benefits have stayed below 350,000 for most of the year, signaling fewer layoffs.

And a closely watched gauge of the U.S. service sector showed that such companies stepped up hiring last month.

Despite the brighter outlook for jobs, the economy is growing sluggishly. It expanded at a 1.8 percent annual rate in the January-March quarter. Most analysts expect growth at roughly the same subpar rate in the April-June quarter.

Weak economies overseas cut demand for U.S. exports in May. That led some economists to predict that growth in the second quarter might be slower than forecast. Still, many areas of the economy are improving.

The Fed's low interest-rate policies have encouraged more Americans to buy homes and cars. They've also helped boost stock and home prices in the first half of the year, increasing wealth and lifting consumers' confidence to its highest level in 5½ years.

Auto sales in the January-June period topped 7.8 million, their best first half since 2007, according to Autodata Corp. and Ward's AutoInfoBank. Sales of previously occupied homes exceeded 5 million in May, the first time that's happened since November 2009. New-home sales rose at their fastest pace in five years.

Though fewer exports have hurt manufacturing, factories did field more orders in May. And a measure of business investment rose for the third straight month.

A stronger second half fueled by continued job gains might be enough for the Fed to begin tapering its stimulus. Chairman Ben Bernanke said last month that the Fed would slow its bond purchases later this year and end them next year if the economy continued to strengthen.

But Bernanke added that if the economy weakens, the Fed could delay its pullback or even step up its bond purchases again. Several Fed members have since tried to clarify Bernanke's remarks by saying any tapering of the bond purchases would depend on the strength of the economy.


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