The fireworks started a day early on Thursday with the Bureau of Labor Statistics announcement that employment increased by 288,000 in June and that the April and May numbers were revised upward by a combined 29,000 jobs.
June marked the fifth month where more than 200,000 jobs were added per month and averaged more than 250,000, a streak that we haven’t seen since the late 1990s.
Furthermore, the unemployment rate now stands at 6.1 percent, down from 6.3 percent and the lowest rate since the beginning of the recession.
One of the nice features of this report was that the lower unemployment rate was the result of actual job creation and not a contraction in the labor force. The labor force participation rate, which measures the labor force compares to the overall working average population, remained at 62.8 percent for the third month in a row.
While this is good news, there is still a good deal of work that needs to be done in this area. As recently as April, 806,000 people left the labor force and in May and June only 275,000 have been added back.
The solid report is important for two reasons beyond the obvious positive nature of more people getting back to work.
First, it signals that the incredibly weak first quarter (downgraded again while I was out to an annualized rate of -2.9 percent) was likely a weather aberration. That’s not to say that the economy will hit some of the rosy projections made at the beginning of the year, but it’s further evidence that it wasn’t a quick recession.
Second, the jobs growth signals that the Federal Reserve has more ability to raise interest rates within the now famous ‘six-month’ period following the end of quantitative easing.
Of course, they will continue to be ‘data-dependent’ and we don’t know what the next 12 months will bring, but these jobs numbers suggest that rates could rise in the second half of 2015 instead of during 2016.
At the same time, it’s worth remembering that five months of gains are great, but there is still a long way to go before we’re fully recovered from 2008 crisis. One economist from the Economic Policy Institute noted that it would take two and a half years for the labor market to fully recover even if job growth continued at the same rate the whole time, an unrealistic expectation at best.
Still, the report was positive, and I am compelled to say that vacation is much nicer when markets are up and the data is good.