U.S. Added 222,000 Jobs in June -- 2nd Update

By Jeffrey Sparshott Features Dow Jones Newswires

The economy keeps churning out jobs as the expansion enters its ninth year, but its failure to generate more robust wage growth remains a dark spot in an otherwise bright labor-market story.

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U.S. employers added a seasonally adjusted 222,000 jobs in June, the Labor Department said Friday, and the unemployment rate rose slightly to 4.4% with more people actively looking for work.

The U.S. has added jobs every month since October 2010, a record 81-month stretch that has absorbed roughly 16 million workers and slowly repaired much of the damage from the 2007-09 recession.

Yet all is not right in the job market: Wage growth remains tepid, a puzzle because worker incomes should in theory rise faster as employers compete for scarce labor.

"This report bolsters the view that the economy is still on solid footing, but wage growth remains subdued," said Seth Carpenter, economist at UBS.

Average hourly earnings for private-sector workers rose slightly in June, 2.5% compared with a year earlier, a level little changed since March. As recently as December, the figure was 2.9% and in the months before the recession, wage gains consistently topped 3%.

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The burdens of slow wage growth are softened a bit for workers by the fact that inflation also is low, meaning households are keeping more of what they bring home. Still, the income trend is all the more perplexing because many employers say they are struggling to find workers.

Bryan Health, a Lincoln, Neb., nonprofit hospital network, has about 200 job openings this month, including entry-level cafeteria workers, janitors, clinicians, nurses and other medical specialists. Trouble filling the openings is a potential check on its growth.

"We're a little stymied by the lack of available talent," said Jan Garvin, Bryan's vice president for human resources.

The hospital system is looking at new ways to staff areas with acute shortages, such as respiratory therapy. It plans to pilot a program this fall that pays full tuition plus a stipend or supplemental wages to employees who want to complete a two-year degree in the field.

The system offers one glimpse of the potential for wage gains to start kicking in as the job market tightens. Bryan boosted the pay of most workers 3% this year -- some areas with high demand received a 4.5% raise -- and is weighing a higher wage floor, now set at $11 an hour.

Ms. Garvin said there doesn't appear to be any quick fix to labor shortages in the area.

"We're just taking people [away] from other hospitals, so we're not dealing with the overall need," she said.

Improving opportunities in the job market, though, appear to be slowly pulling Americans off the economy's sidelines. The labor-force participation rate, hovering near a four-decade low, inched up to 62.8% in June from 62.7% the prior month. The rate measures the share of the population 16 and older either working or looking for a job.

Low participation is partly because of shifts at both ends of the workforce age spectrum -- fewer young Americans are looking for work and baby boomers are retiring. Among prime-age workers, those 25-54 years old, participation bottomed out in September 2015 and has been gradually trending higher. Job-market participation remains below its level just before the recession, suggesting there could be room for further growth.

That represents a potential untapped source of labor for employers like Bryan Health. It also suggests a continued weight on wages in the form of a hidden labor supply.

That's only one possible explanation for soft wage gains. Economists also point to low growth for productivity and inflation, which limit the ability of firms to raise pay without eating into profits. Companies may also be hunting out cheaper workers -- either younger or less skilled ones -- rather than competing solely on wages.

"One alternative is to substitute away from perfectly qualified candidates and start looking at people who are a little less experienced, people who can be trained up," said Cathy Barrera, chief economic adviser for job-search site ZipRecruiter.

Finally, inflation hasn't been eating away wages as much as it has during past economic cycles. One measure with a long historical record, average hourly earnings for production and nonsupervisory workers, shows inflation adjusted earnings rising year-over-year for 49 consecutive months at a rate that isn't out of line with other extended periods of job creation.

An alternative measure of unemployment and underemployment, which includes those who have stopped looking and those in part-time jobs who want full-time positions, was 8.6% in June, up from 8.4% from the prior month. The rate averaged 8.3% in the two years before the recession.

Signs of steady hiring are helping to give some workers confidence to take risks.

Christal Brown decided to leave Mattress Firm, the Houston-based retailer where she worked for 18 years, rather than take a new role she felt didn't fit her skills. Her last day was June 1. Ms. Brown, 44 and most recently the vice president of human resources, said she is confident she will find a new job in the coming months without having to relocate from her home in Houston. She has already landed a few interviews and hopes to find another role.

"I thought this was a good time to see what was out there to help me grow professionally," she said. "There are definitely jobs out there."

Opportunism like that has been in short supply through much of this slow expansion.

In response to broad improvements across the labor market, the Federal Reserve raised short-term interest rates last month for the third time since December. Officials penciled in one more increase for this year, and appeared to reach consensus on how to gradually reduce the Fed's $4.5 trillion asset portfolio, moves that could lead long-term rates to rise.

"Today's report will keep the Federal Reserve on the path of gradually raising interest rates," said Gus Faucher, chief economist at PNC Financial Services.

Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com

(END) Dow Jones Newswires

July 07, 2017 15:47 ET (19:47 GMT)