Why higher unemployment signals a strengthening economy

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So far this year, the USA economy has added an average of 215,000 jobs per month.

The unemployment rate ticked up to 4% from 3.8%, but this was because more people entered the labour force looking for work.

The United States has increased jobs monthly for more than seven years, but some analysts suggest that the escalating trade disputes between the U.S. and its allies could threaten growth.

The employment increase last month beat economist expectations for a 20,000 gain and was the second highest so far in a year where job creation has been sluggish.

Manufacturers hired 36,000 workers in June, the most in six months, adding to the 19,000 jobs created in May. Construction payrolls likely increased after rising by 25,000 in May. But the average was skewed downward in June because the job seekers were mainly those with only a high school education or less, who are generally paid lower wages, Barrera noted. After revisions, job gains have averaged 211,000 per month over the past three months.

Canada received a dose of new jobs last month, maintained sturdy wage growth and saw more people searching for work - all seen as positives by experts who believe the path is clear for the central bank to raise interest rates next week.

The latest data will probably not change the Federal Reserve's policy of gradually tightening interest rates and expecting two more interest-rate hikes by the end of the year.

In spite of the strong job gains and widely voiced complaints from employers about difficulties in finding workers, wage growth does not appear to be accelerating.

Average hourly pay rose just 2.7 percent from a year earlier.

"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.

Altogether, 285,000 new jobs have been added in the manufacturing sector in the past year. These individuals accounted for 23 percent of the unemployed, says the Labor Department.

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

Today's data is another proof that 2018 will be the 8th consecutive year with an employment growth of at least 2 million. Trump oversaw a steadily-declining unemployment rate which eventually reached its lowest level since 2000. And the unemployment rate remains at its lowest in more than 18 years.

Nonetheless, an escalating trade war poses a clear threat. Also, President Donald Trump has slapped tariffs on imports that have provoked tit-for-tat countermeasures by other countries in an escalating trade war that's starting to unnerve USA corporations. Economists are forecasting that economic growth accelerated to an annual pace of roughly 4 per cent during the April-June quarter, about double the previous quarter's pace.



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