Tuesday, May 22, 2018
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Stock Market


Hiring surge pushes Dow over 17,000

Wall St. hits record high;jobless rate falls to 6.1%

WASHINGTON — Job growth surged in June, capping the U.S. economy’s best first half since 1999, driving blue chip stocks to a record high, and leading analysts to say the economy is shifting to a higher gear.

Employers added 288,000 jobs last month, the Labor Department said on Thursday, pushing the unemployment rate down two-tenths of a percentage point to 6.1 percent, where it last was in September, 2008.

Buoyed by the jobs report, the Dow Jones industrial average of blue chip stocks raced past the 17,000 threshold at the open of trading and stayed there all day.

Financial markets closed early for the Independence Day holiday, and the Dow Jones industrial index, composed of 30 major corporations, finished up 92.02 points to a record of 17,068.26.

The Standard & Poors index 500 rose 10.82 points to 1985.44, approaching a record. The tech-heavy Nasdaq closed the day up 28.19 points to 4485.93.

The new jobs exceeded expectations that the economy would add about 200,000 jobs last month.

Statisticians also increased May’s already strong preliminary jobs number by 7,000 to 224,000, and April’s number by 22,000 to 304,000.

“Businesses are finally getting their groove back and hiring more. This signals that the expansion is moving into a stronger phase,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics.

“The job market has kicked into a higher gear. This month’s strong job gain overstates the case, but job growth is now double the pace necessary to reduce unemployment,” Mr. Zandi said.

Over the last 12 months, the unemployment rate has fallen by 1.4 percentage points and there are 2.3 million fewer unemployed people. The rate peaked at 10 percent in March, 2009.

“Unemployment will soon blow through 6 percent, which will prompt a pickup in wage growth,” Mr. Zandi said. “Most people have jobs, and care most about how fast their pay is increasing. As wages improve, so too will consumer confidence and spending.”

Getting the jobless rate below 6 percent would cross an important psychological threshold.

Unemployment was 4.7 percent to 6 percent for much of 2007 and early 2008, when the economy was humming right before the crisis.

The falling unemployment rate puts the Federal Reserve in a bind. It keeps the Fed on pace to end its purchases of government and mortgage bonds by year’s end.

But because the economy is heating up, it might force the Fed to choose between higher inflation and higher lending rates.

The Fed has held its benchmark lending rate near zero since December, 2008. But as the economy improves, inflation should pick up, and raising interest rates is how the Fed clamps down.

President Obama celebrated the news.

“We’ve now seen the fastest job growth in the United States in the first half of the year since 1999. So this is also the first time we’ve seen five consecutive months of job growth over 200,000 since 1999,” Mr. Obama said during a tour of a start-up company in the nation’s capital.

“And we’ve seen the quickest drop in unemployment in 30 years. So it gives you a sense that the economy has built momentum, that we are making progress,” he said.

Labor Secretary Thomas Perez concurred.

“This is one of the strongest reports we’ve seen since the end of the recession,” Mr. Perez said. “There was good job creation in high-wage, mid-wage, and low-wage positions. It was broad-based.”

Republicans acknowledged that while the snapshot for June was encouraging, other underlying signals remain weak.

The labor participation rate, for example, has been stuck near multidecade lows at 62.8 percent for three months in a row.

A year ago, it stood at 63.5 percent. It is one reason the unemployment rate has come down as quickly as it has, since people who drop out of the work force aren’t counted as unemployed by government statisticians.

But the jobs growth buried any doubts raised by the 2.9 percent economic contraction from January to June, caused partly by an unusually harsh winter.

“During the first six months of 2014, the labor force rose by 757,000 while household employment jumped by a much bigger 1.64 million,” noted Stuart Hoffman, the chief economist for PNC Financial in Pittsburgh. “The solid rise in the number of job seekers thus far this year is a sign of growing confidence in the economy on the part of employers and would-be employees.”

Also, retailers created more than 40,000 jobs last month and the broad sector of leisure and hospitality added almost as much, with 39,000 new posts.

The professional and business services sector, composed of better paying, white-collar jobs, led all others with 67,000 new posts. The financial sector added 17,000 posts and health care hiring remained sluggish but rose by 21,000.

Hiring was uneven within the manufacturing sector, which added 16,000 jobs.

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