How the higher unemployment rate is actually a good sign

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Following weeks of uncertainty over the escalating trade war measures imposed by the United States on China and other economic rivals, USA stock indexes ended the week with a rally in response to Friday's release of the Bureau of Labor Statistics (BLS) June jobs report, which found that continued job growth has still not produced any significant increase in wages for workers.

Last month, USA employers added an extra 213,000 jobs which was higher than the expected figure thus extending America's long-running growth line. Average hourly earnings are 2.7 percent higher than a year ago, a lackluster pace compared to past eras of healthy job growth when wages were rising at 3.5 percent or more a year.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to 62.9 percent last month from 62.7 percent in May.

Policymakers at the Federal Reserve, the U.S. central bank, monitor the report because they can raise interest rates when employment is close to full, wages are rising healthily and unemployment is low.


Canada's tight jobs market is beginning to bring more workers into the labour force, a trend that if sustained may moderate a recent pick up in wage pressures. There are also growing fears of global disruptions as a trade fight escalates between the USA and China.

Because it means that more people are starting to look for jobs.

In spite of the tightening labor market, however, wage growth remains anemic. Average hourly earnings advanced 2.7 per cent from a year earlier, while the jobless rate increased to 4 per cent from 3.8 per cent, the first rise in nearly a year.

Stocks jumped on Friday, riding the wave of the robust jobs report.


"Overall, this "not too hot, not too cold" report supports our call for four Fed rate hikes in total this year", Gregory Daco, head of USA macroeconomics at Oxford Economics in NY, said in a note. However, fears of a trade war with other countries, especially China, have many anxious the economy could slow down or shrink in the months ahead.

For Catherine Barrera, who works as the Chief Economist for online job site ZipRecruiter, reportedly said the labor force numbers quelled her concern about the unemployment figure.

The manufacturing sector, a target of Trump's "Make America Great Again" agenda, added 36,000 jobs in June, just the latest of a series of good news stories about the industry.

Even nicer, another 37,000 new jobs were added to April and May. "Not only did payroll employment increase by 213,000 - evidence that employers are finding workers - but wage growth held steady at a disappointing 2.7 percent - evidence that employers are not having to raise wages to attract and retain workers". With upward revisions to the data from the prior two months, the average gain over the last three months was 211,000. In spite of healthy job growth, wage growth is especially weak in manufacturing, rising just 1.7 percent over the a year ago.


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