US non-farm payrolls surges past expectations

The June US non-farm payrolls report smashed expectations on Friday, rebounding from a weak jobs report the previous month.

The Labor Department said the US economy added 287,000 jobs in June, well above the 180,000 that economists had forecast. May’s figures were revised down to 11,000 jobs from an already-low 38,000, which had been affected by 35,000 Verizon workers on strike.

The return of Verizon staff to work gave a boost to information technology jobs in June.

Last month's turnaround was also helped by job gains in leisure and hospitality, health care and social assistance, and
financial activities.

However, the unemployment rate rose to 4.9% in June from 4.7% in May, more than the expected rate of 4.8%.

Wage growth was weaker-than-anticipated, with average hourly earnings rising 2.6% in June from a year ago compared to estimates for a 2.7% increase. Earnings climbed 2.5% year-on-year in May.

On a month-on-month comparison, average hourly earnings edged up 0.1% in June, missing forecasts for an unchanged 0.2% gain.

“US employment growth rebounded with a vengeance in June, but the underlying trend remains one of a slowdown in hiring, and it’s far from clear whether June’s bumper non-farm payroll increase reflects a renewed appetite for companies to hire staff,” said Chris Williamson, chief economist at Markit.

“For sure, today’s data add to scope for interest rates to be nudged higher before the year is out. But the bigger picture remains one in which the Fed is likely to err on the side of caution, with policymakers viewing the better than expected hiring in the perspective of a more uncertain longer-term outlook.”

The Federal Reserve had cited May's weak jobs report as playing a part in its decision to hold off on raising interest rates in June, but the uncertainty surrounding Britain's European Union referendum was the main factor.

Economists believe a rate hike by the Fed is a long way off and the central bank is unlikely to be swayed by a stronger non-farm payrolls report in June in the wake Britain's vote to leave the EU.

“Although the Federal Reserve will take encouragement from this vital data, they simply aren’t in a position to consider a rate hike at the moment. There is still huge uncertainty around the world, but the US economy has at least taken a step in the right direction here," said Dennis de Jong, managing director of UFX.com.