The US unemployment rate has fallen to 5.3% – the lowest in seven years – after the economy added 223,000 jobs in June.
The drop in the unemployment rate from 5.5% in May to 5.3% June takes it to the level that the US government considers full employment, and heightens expectations that the Federal Reserve will raise interest rates as soon as September.
However, the Labor Department said the biggest reason for the fall in the unemployment rate was because people out of work gave up looking for a job and were thus no longer counted as unemployed.
Labor secretary Thomas Perez welcomed “another solid jobs report”. “Not only is the quantity of jobs growing but the quality too,” he said. Perez added that more work needed to be done and that wages needed to rise.
“There’s no magic bullet that will raise wages for everyone,” he said. But he said that the Obama administration’s move to raise the number of people who qualify for overtime payments and efforts to raise the minimum wage would help.
“Part of [the issues the jobs market still faces] is the depth of the hole we had to dig out from,” he said. “In recent decades, with the exception of the last few years of the Clinton administration, workers have not shared fairly in recovery and employees have got an all too disproportionate share.”
The addition of 223,000 jobs was lower than the 233,000 economists had expected. The department also had to revise down, by 60,000, the number of jobs it previously said were added in April and May.
“The headline payrolls rise was only 223,000, a little less than the published consensus, though we suspect that the real consensus was closer to our house view of 260,000,” Rob Carnell, Chief International Economist at ING, said. “Rubbing salt into the wound, there were also 60,000 of downward revisions, and the May result was revised down to 254,000 from 280,000.”
The US economy has been adding jobs at an average rate of 217,000 a month so far in 2015, raising expectations that the Fed may make a historic move to increase interest rates in September.
The US central bank has kept interest rates near zero since December 2008.
Chris Williamson, chief economist at Markit, said: “We are likely to see the Fed continue to prepare the ground for an initial rate hike later this year. However, the Fed will stress that policy will be very much dependent on economic conditions remaining supportive in coming months.
“Moreover, the pill will be sweetened by strong reassurances that a benign inflation outlook means the path of further rate rises will be gently sloping and carefully measured, rather than steep and aggressive.”
