U.S. jobs surge sparks talk of Fed taper

WASHINGTON (AFP) ― The United States added 195,000 jobs in June, the Labor Department said on Friday in a better-than-expected report that stoked speculation the Federal Reserve will soon curb its large economic stimulus.

Bond yields shot up while Wall Street stocks closed one percent higher after the June employment growth came in well above the consensus estimate of 166,000 jobs.

Marking the steady pickup in job creation in the economy, the April and May jobs numbers were revised higher, by a combined 70,000 jobs.

That took the average over the first six months of 2013 to 201,000 net new positions per month, compared with 185,000 in the year-ago period.

Meanwhile the unemployment rate held steady as expected in June at 7.6 percent, as the number of people in the work force continued to rise, the department said.

“Businesses are hiring solidly and if they keep it up, it will be only a matter of time before the unemployment rate starts coming down consistently,” said Joel Naroff of Naroff Economic Advisors.

The unexpectedly strong jobs report suggested the economy was weathering the federal government’s tough sequester spending cutbacks that started in March, analysts said.

It also sparked fresh speculation that the Fed’s policy-setting Federal Open Market Committee would begin to reduce its quantitative easing stimulus program soon.

Fed Chairman Ben Bernanke has said the central bank could start to taper the $85 billion a month asset purchases in the coming months if the economy continued to improve.

The labor market is the primary factor in such a decision, as inflation remained well below the Fed’s 2.0 percent comfort zone.

“Given Bernanke’s penchant to judge job growth from the six-month average, he is likely to see this report as evidence of economic strength, both a vindication of QE and a reason to start curtailing it,” said Chris Low of FTN Financial.

Nomura Global Economics agreed.

“This report keeps the FOMC on track for tapering in September as employment growth is consistent with the gradual improvement we have been expecting,” Nomura said.

The U.S. private sector continued to drive job growth in the world’s largest economy, adding 202,000 positions.

The government cut 7,000 jobs, 5,000 of them at the federal level, in part reflecting the ongoing sequester spending cuts.

The most robust job growth ― 75,000 new jobs ― was in the leisure and hospitality sector, which has been making a strong comeback over the past 12 months amid a modest economic expansion.

In that sector, 52,000 jobs were added in restaurants, bars and caterers.

Other leading gains were in professional and business services, up 53,000 jobs, retail trade (+37,000), health care (+20,000) and financial activities (+17,000).

The number of people unemployed was 11.8 million, up a slight 17,000 from May.

Other parts of the report reflected the painfully slow recovery in the labor market. The number of people forced to take part-time rather than full-time jobs rose by 322,000 to 8.2 million in June.

And the number of “discouraged” workers, people who have given up searching for work, increased 206,000 from a year go to 1.9 million.

“While more work remains to be done, today’s employment report provides further confirmation that the U.S. economy is continuing to recover from the worst downturn since the Great Depression,” Alan Krueger, president Barack Obama’s chief economic adviser, said in a statement.