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Another strong jobs report - here’s why unemployment jumped

08 July 2018

Hourly wages increased by 0.2 percent for an average annual increase of 2.7 percent, lower than analysts had hoped. The low jobless rate has yet to force employers to offer higher wages in order to fill job openings.

May's job gains were also revised up to 244,000 from 223,000, and job gains have now averaged 211,000 per month over the last three months.

Gross domestic product growth estimates for the April-June period are as high as a 5 percent annualized rate, more than double the 2.0 percent pace logged in the first quarter. Over the past year, average monthly payroll gains have hovered around 200,000, and hiring has been running ahead of growth in the labor force.

Signs of the Trump administration's trade war with China and did not show up in the report.

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Looking at the bigger picture, the best measure of how robust the labor market is (the ratio of those aged 25-54 who have jobs to the overall 25-54 population) returned to cycle highs in June at 79.3% (matching February's level).

By industry, June was another strong month for the manufacturing sector, which added 36,000 jobs during the month after adding about half that number in May. But retailers shed 21,600 jobs, with the losses concentrated at general merchandise stores.

The broader US economy appears sturdy. In the chart below, we show two versions of the unemployment rate. There were increases in professional and business services employment as well as leisure and hospitality. The number, however, did come down from its nine-year high in May of 3.9 per cent. The unemployment rate rose by 0.3 percentage points in June for college grads. President Donald Trump's tax cuts have provided a dose of stimulus this year, but the benefits have been tilted significantly toward wealthy individuals and corporations. "This generates a rising standard of living and strong income growth".

The unemployment rate in Windsor dipped slightly last month, but so too did the labour participation rate.

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The economy also faces a substantial threat from the trade tension with China and from other trade disputes with US allies, including Canada and Europe.

As IJR previously reported, the economy saw many milestones during Trump's presidency. Trump has spoken about slapping tariffs on imported cars, trucks and auto parts, which General Motors has warned could hurt the USA auto industry and drive up vehicle prices.

Major trade partners, including China, Canada, Mexico and the European Union, have retaliated with their own tariffs. Automakers added 12,000 jobs in June.

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Another strong jobs report - here’s why unemployment jumped