U.S. companies aggressively ramped up their hiring last month following a brief period of weakness in the labor market, in an encouraging sign that the economy is still generally improving.
Employers in the U.S. added 287,000 jobs in June, according to data from the Bureau of Labor Statistics released on Friday, while the unemployment rate ticked up to 4.9% from 4.7%. Economists were anticipating that 180,000 jobs would be added and the unemployment rate would rise to 4.8%.
This jobs report is a huge improvement over the previous month, when the U.S. added just 11,000 jobs, which was revised even lower from earlier estimates that 38,000 jobs were added. This was already the smallest gain in nearly six years and played a role in the Fed’s decision to leave rates untouched at its last meeting.
“This basically confirms that the weak numbers the other month were not a harbinger of a broader economic slowdown,” said Andrew Chamberlain, chief economist at Glassdoor, in a phone interview.
It helped that some 35,000 Verizon employees were counted in the June figures after returning to work from their strike. Their brief exit from the workforce had been a drag on the previous month’s figures.
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The labor force participation rate in June was little changed at 62.7%, from 62.6% in May. Hourly earnings, which have been slow to rise following the recession, edged up two cents to $25.61.
While the U.K.’s decision to leave the European Union has thrown markets into a tailspin, it didn’t factor into the month’s job figures, since the June 23 referendum wasn’t held until after the jobs survey took place. However, that doesn’t mean the reverberations won’t still be felt in coming months.
The Fed will continue to keep a watchful eye on the impact of Brexit, but it’s likely going to be encouraged by the robust job growth in June. The Fed is “definitely breathing a sigh of relief,” said Chris Gaffney, president of EverBank World Markets, in a note.
In its latest minutes, which were released on Wednesday, the Fed indicated that it was waiting to see whether the recent hiring slowdown was a blip or here to stay. “In evaluating recent economic information, participants generally agreed that it was advisable to avoid overreacting to one or two labor market reports, however, the implications of the recent data on labor market conditions for the economic outlook were uncertain,” said the minutes.
The Fed will hold its next meeting from July 26 to 27. After the jobs report, the chance of additional rate hikes this year rose to 23% from 15%, according to the futures market. “Today the odds that the Fed will move on interest rates has definitely increased,” noted Chamberlain.
It’s possible that some investors will greet the jobs report with skepticism as the Brexit fallout looms. Even with a positive jobs report, “markets are apt to dismiss it as old, pre-Brexit news,” suggested Ellen Zentner, chief U.S. economist at Morgan Stanley, in a note published prior to the results.
Stocks were trending upward on Friday, with the Dow adding about 100 points, or 0.7%, and the S&P 500 and Nasdaq each up about 0.6%.