US adds 288K jobs in June, unemployment at 6.1 percent — a six-year low

U.S. job growth jumped in June, resulting in the headline unemployment rate falling to a near six-year low of 6.1 percent — rosier-than-expected data that go some way to dispelling recent fears over the pace of economic recovery and underscoring momentum heading into the second half of 2014.

The upbeat data was cheered by investors, pushing the Dow Jones industrial average to a new high at close of above 17,000.

Nonfarm payrolls increased by 288,000 jobs, the Labor Department said on Thursday. Data for April and May were revised to show a total of 29,000 more jobs created than previously reported.

It represents the first time since the technology boom in the late 1990s that employment has grown above a 200,000-jobs pace for five straight months.

“I’m a little hesitant to say rosy, because we still have a long way to go before we’re back where we were before the recession,” said Dean Baker, economist at the Center for Economic Policy Research. “But it’s still an overwhelmingly positive report.”

The closely watched employment report, along with robust auto sales in June and data showing a steady manufacturing expansion, suggests the plunge in economic output in the first quarter could well have been a weather-driven anomaly.

Gross domestic product contracted at a 2.9 percent annual rate from January to March, causing a sharp downgrading of growth estimates for this year. Output in the second half of the year is forecast around a 3.5 percent rate.

The sturdy pace of job gains was flagged by reports on Wednesday showing that companies hired the most workers in a year and a half in June, with small business hiring increasing for a ninth straight month.

With new applications for jobless aid holding at lower levels and the share of businesses that cannot fill open positions rising, there is little doubt the labor market is tightening.

“The declining unemployment rate to 6.1 percent was legitimate, as we didn't have any change in the participation rate, it was all on the employment side,” said Jacob Oubina, a senior economist at RBC Capital Markets. “It's a report that really checks off all the positive boxes. I don't think you could have asked for a stronger read.”

The 0.2 percentage point drop in the unemployment rate in June to its lowest level since September 2008 came even as the labor force swelled. The unemployment rate has declined from a peak of 10 percent in October 2009, driven by job gains and a shrinking labor force.

There has been some concern that while joblessness falls, the percentage of Americans without work is remaining steady. The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, was at 62.8 percent in June, compared with 66 percent before the recession, continuing its relatively flat trend.

In May, the economy surpassed its jobs total for December 2007, when the Great Recession started. But economists at the liberal Economic Policy Institute estimate that 7 million more jobs would have been needed to keep up with population growth.

Average wages, meanwhile, have grown just 2 percent a year during the recovery, below the long-run average annual growth of about 3.5 percent.

The tepid wage growth, and the fact that many of the new jobs have been with temp agencies and other low-wage sectors, have led some economists to think the economy isn't really back at pre-recession levels.

But Baker says that will likely change as the recovery picks up speed.

"A lot of people have been forced to take low-paying jobs, but as the unemployment rate drops that will hopefully change," he said. "The hope would be as the labor market tightens, people will find better-paying jobs."

Many economists predicted late last year that the steady but tepid recovery would accelerate in 2014. The momentum built over the past four years will finally unleash more hiring and higher wages, they said.

Other than the weak growth at the start of the year, the economy's health appears to be improving.

Auto sales rose at the fastest pace in eight years in June. Dealers unloaded vehicles at an annual pace of 16.98 million last month. Factory orders picked up in June as well, according to a report this week by the Institute for Supply Management.

Home sales also strengthened, after having sputtered in the middle of last year when higher mortgage rates and rising prices hurt affordability.

The positive indicators have spurred on the market, with the Dow breaking the 17,000 barrier for the first time, marking its first 1,000-point milestone this year.

Trading was extremely light, though, and ended early ahead of the Fourth of July holiday Friday.

Thursday's gains add to what has been a strong month-and-a-half for Wall Street. Along with the Dow hitting 17,000, the Standard & Poor's 500 index is approaching its own milestone of 2,000.

"Right now the story is onward and upward," said Neil Massa, senior trading at John Hancock Asset Management.

The White House welcomed the latest job figures, and used the opportunity to push for further economic policy initiatives.

"While today’s jobs report is encouraging, many families are still struggling with long-term unemployment and wages that have been stagnant for decades," said Jason Furman, chairman of the Council of Economic Advisers, in a statement.

"The President continues to press Congress to take steps to further strengthen the economy, including passing a transportation bill to avoid jeopardizing hundreds of thousands of jobs later this year. But he will also continue to make progress using his own authority to increase economic opportunity, support wage growth, and ensure America’s workplaces are adapting to the 21st century."

Al Jazeera and wire services