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Finance US unemployment rate jumps even though employers add more jobs than expected

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The June jobs report showed employers added more jobs than expected. The unemployment rate increased, but that was because more people joined the labor force to look for work.

A boy rides a decorated bicycle down Main Street during the annual Fourth of July parade in Barnstable Village on Cape Cod, Massachusetts, U.S., July 4, 2018. play

A boy rides a decorated bicycle down Main Street during the annual Fourth of July parade in Barnstable Village on Cape Cod, Massachusetts, U.S., July 4, 2018.

(Mike Segar/Reuters)

  • The June jobs report showed employers added 213,000 nonfarm payrolls, more than economists had expected.
  • The unemployment rate jumped from 3.8%, the lowest since 2000, to 4% because more people joined the labor force to look for work.
  • Wage growth slowed.

The US economy added 213,000 jobs in June, more than expected, while the unemployment rate jumped to 4%, according to the jobs report released by the Bureau of Labor Statistics on Friday.

June was a record 93rd straight month that private-sector employers hired more people than they fired or laid off. Some of the strongest industries for job growth during the month included manufacturing, which extended a surge in hiring by adding 36,000 jobs. Healthcare was another strong sector.

Economists had forecast that employers added 195,000 payrolls last month, according to the median estimate compiled by Bloomberg. They had expected that the unemployment rate held steady at 3.8%, the lowest level since 2000.

The unemployment rate increased because more people were looking for jobs; the labor-force participation rate rose to 62.9% from 62.7%. Women stormed back into the workforce, with the participation rate among prime-age women (25-54) rising by 0.5%, the most since 1994.

Participation remains historically low, and many economists have pointed to the aging of baby boomers as a key reason why.

Wage growth slowed in June. Average hourly earnings increased by 0.2% month-on-month and 2.7% year-on-year, weaker than economists had forecast. An acceleration of this rate would have shown that employers were indeed paying up for the skilled workers they say are in decreasing supply. According to a report Thursday from the HR-software provider ADP, business' "number one problem is finding qualified workers."

Faster wage growth would have also indicated that inflation was building in the economy, which hasn't strongly been the case even though unemployment is this low.