Solid US job gains pointing to a stronger recovery

WASHINGTON — The 5-year-old U.S. recovery is gaining momentum from a surprisingly robust job market and moving the economy closer to full health.

Employers added 288,000 jobs in June and helped cut the unemployment rate from 6.3 percent to 6.1 percent, the lowest since 2008. It was the fifth straight monthly gain above 200,000 — the best such stretch since the late 1990s tech boom.

The stock market signaled its approval. The Dow Jones industrial average surged 92 points to top 17,000 for the first time.

The breadth and consistency of the job growth are striking in part because of how poorly the year began. The economy shrank at a steep 2.9 percent annual rate in the January-March quarter as a harsh winter contributed to the sharpest contraction since the depths of the recession.

Yet employers have shrugged off that setback. They've kept hiring.

The unemployment rate dipped from 6.3 percent in May to its lowest level since the financial crisis struck with full force in the fall of 2008, when the Wall Street firm Lehman Brothers went bankrupt.

"This has now become a textbook jobs expansion," said Patrick O'Keefe, director of economic research at the consultancy CohnReznick. "It is both broad and accelerating."

At least one nagging doubt is dampening the enthusiasm: Can the stepped-up hiring lead to higher incomes? Wages have yet to outpace inflation for most workers. Eventually, analysts say, the falling unemployment rate should cause pay to rise more sharply. But no one knows precisely when.

The jobs report did make clear that, five years after the recession officially ended, the U.S. economy is showing more vitality even as major economies in Europe and Asia continue to struggle.

Last month's solid hiring followed gains of 217,000 jobs in May and 304,000 in April, figures that were revised upward by a combined 29,000.

Over the past 12 months, the economy has added nearly 2.5 million jobs — an average of 208,000 a month, the fastest year-over-year pace since 2006.

Economists say the steady U.S. hiring should fuel more purchases of goods from Asia and Europe and strengthen those economies at least slightly. Much of Europe is suffering from high unemployment. And China is trying to moderate its economy's growth without slowing it too much.

"If we have some momentum going into the second half of the year, it helps the world economy because we're big consumers," said Stuart Hoffman, chief economist at PNC Financial Services.

The U.S. job gains in June were widespread. Factories added 16,000 workers, retailers 40,200. Financial and insurance firms increased their payrolls by 17,000. Restaurants and bars employed 32,800 more people. Only construction, which gained a mere 6,000, reflected the slow recovery of previous years.

Local governments added 18,000 education workers. But that might have been a quirk: Many schools that had been closed for snow days stayed open longer than usual in June, said Diane Swonk, chief economist at Mesirow Financial in Chicago.

Over the past three months, job growth has averaged a healthy 272,000. And in May, the economy surpassed the jobs total from December 2007, when the Great Recession officially began.

Researchers at the liberal Economic Policy Institute estimate that 6.7 million more jobs would have been needed to keep up with U.S. population growth.

One key challenge is whether the job gains will pull more Americans back into the workforce. Many people who lost jobs during the recession and were never rehired have stopped looking for work. Just 62.8 percent of American adults are working or are looking for a job, compared with 66 percent before the downturn.

The number of long-term unemployed has dropped 1.2 million over the past year to just under 3.1 million. But the government data suggests that numerous people without jobs have given up their searches — a trend that could drag on future U.S. growth.

And average pay has grown just 2 percent a year during the recovery, roughly in line with inflation and below the long-run average annual growth of about 3.5 percent.

The lack of strong wage growth means the Federal Reserve may not feel pressure to start raising short-term interest rates soon as a way of controlling inflation.

"We are still not seeing any significant pickup in wage growth," Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a research note. "We suspect that Fed officials will continue to cling to the view that there is still plenty of slack in the labor market."

However, the steady hiring means businesses are increasingly competing to find workers.

"It's becoming more difficult to find the candidates that we're looking for," said Brandon Calvo, chief operating officer at Cosentino North America, a Houston-based firm that sells materials for kitchen counters and bathrooms.

The job gains have intensified despite the slump that kicked off 2014.

The economy's contraction in the first three months of this year was the sharpest since the recession. Ferocious winter storms caused factories to close and prevented consumers from visiting shopping malls and auto dealers.

Still, the frigid weather failed to freeze hiring. Job gains ramped up with the warmth of spring and summer.

"We've seen hiring growth out of the winter because it was stagnant," said Richard Bitner, vice president of marketing for Visiting Angels, a home health care services firm headquartered in Havertown, Pennsylvania.

Most economists say annualized economic growth likely reached a solid 3 percent to 3.5 percent in the April-June quarter. Growth over the entire year should be about 2 percent, they say, similar to last year's 1.9 percent expansion.

Several other signs point to the economy's brightening health.

Auto sales rose at the fastest pace in eight years in June. Factory orders picked up last month. And home sales strengthened this spring after having sputtered in the middle of last year when higher mortgage rates and rising prices hurt affordability.

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AP Economics Writer Paul Wiseman contributed to this report.

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