Another strong jobs report. Here’s why unemployment jumped

There’s still more room to run for America’s labour market, just as a trade war threatens the outlook for the world’s largest economy. Data for April and May was revised to show 37,000 more jobs created than previously reported.

The unemployment rate moved up last month despite the addition of new jobs because almost 76,000 more people entered the workforce.

Private employment rose by 202,000 (median estimate 190,000) after increasing 239,000; government payrolls rose by 11,000, most since August.

As hiring continues unabated, the Federal Reserve is likely to raise interest rates two more times this year, as it weighs concerns that the economy could overheat.

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

Though economic growth appears to be solid, the gains have been spread unevenly.

“Overall the report is good news insofar as it suggests the economy still has some capacity to grow at an above-trend pace without generating much inflationary pressure”, said Michael Feroli, an economist at JPMorgan in NY.

Last month, U.S. employers added an extra 213,000 jobs which was higher than the expected figure thus extending America’s long-running growth line. That’s consistent with other reports showing strength in factory activity.

Savings from the tax cuts enabled companies in the Standard & Poor’s 500 stock index to buy back a record number of shares in the first three months of 2018.

“I think that we’re seeing the front loading of the fiscal-stimulus impact, which we expected to boost growth this year”, Julia Coronado, president of MacroPolicy Perspectives LLC in NY, said on Bloomberg Television. That’s an increase in total employment of a quarter of a million jobs.

Economists expect the manufacturing sector to bear the brunt of the tit-for-tat tariffs, through a slowdown in hiring and capital expenditure. At more than 1.141 million people employed in the industry in June, the legal jobs figures edged outside of a range that has prevailed since December 2016. The civilian labor force, according to BLS, added 601,000 people while the labor force participation rate increased by 0.2 percentage points.

That said, the labor market isn’t flawless.

Nonfarm payrolls rose by 213,000 jobs last month, the Labor Department said on Friday.

This suggests that these 600,000 newly available workers can quickly find work if they have the right skills and that the unemployment rate will very swiftly fall back.

Tapping into the potential pool of those who have given up looking for work, the job market seems to still have room for improvement.

Faster wage growth would also indicate that inflation is building in the economy, which hasn’t been the case even though unemployment is this low.

The U-6 unemployment measure-which includes those who have given up searching for work, are marginally attached to the labor force (due to lack of steady employment), and those who are forced to work part-time but would like to work full-time-also moved up by 0.2 percent to 7.8 percent over May’s report.