
There Is Room for More Significant Job Gains in the Coming Months ... and a Rate Hike?
Today's Bureau of Labor Statistics employment report for the month of June, with 287,000 new jobs added to the U.S. labor market, signals a reversal after several months of declining labor market gains. The rebound shows that employers are still hiring at a solid clip, and that after a trend of weak numbers leading up to last month's meager gain of 11,000, the U.S. economy is ending the first half of 2016 on a strong note.
What it also shows is that we may still be in for another interest rate hike in 2016 -- that is, if the strong hiring continues.
Heading into the second half of 2016, these numbers are reassuring that the U.S. labor market is not entering a significant slowdown. With employer demand strong, there is room for continued jobs gains over the next several months.
This is the highest monthly jobs growth figure since October 2015. However, weak numbers from April and May mean it's still the case that job gains over the past three months have averaged about 147,000, lower than the 200,000 we have become accustomed to in the last couple of years of the economic recovery. Nevertheless, these numbers are still strong enough to more than accommodate new entrants to the labor market and signal continued economic strength.
It's also encouraging to see the variety of industries in which employers are adding to headcounts. Leisure and hospitality and healthcare led payroll gains in June, while two key sectors -- construction and manufacturing -- remained flat. Mining employment continued its downward trend, although this is hardly a surprise after turmoil in the oil market over the past two years.
As the data were collected before the Brexit referendum, any apprehension created for employers would not be reflected in this report. Looking ahead, considerable uncertainty resulting from the Brexit will likely be a headwind for the global economy.
Had the U.K. referendum for the Brexit gone the other way, this report could have brought into play an interest rate hike as early as September. As things stand, Janet Yellen and the Fed could hold off for the rest of the year unless job gains and wage growth really pick up steam in coming months.
This article is commentary by an independent contributor.









