WASHINGTON – U.S. employers added a solid 223,000 jobs in June, and the unemployment rate fell to 5.3 percent, a seven-year low. The numbers reflect a job market moving close to full health and raise expectations that the Federal Reserve will start raising interest rates as early as September.
The Labor Department said Thursday that the unemployment rate dropped from 5.5 percent in May. The rate fell mostly because many people out of work gave up on their job searches and were no longer counted as unemployed.
Other details in the report were less encouraging: The percentage of Americans working or looking for work fell to a 38-year low. Average hourly pay was flat. And employers added 60,000 fewer jobs in April and May than the government had previously estimated.
For the first five months of 2015, monthly job growth averaged 217,000, a healthy streak that has been steadily absorbing the unemployed as well as part-time workers looking for more hours.
That job growth has raised economists' expectations that the Fed will soon boost the key short-term rate it controls in September or, if not, in December. The Fed has kept that rate at a record low near zero for 6½ years to support the economy. A Fed rate hike would lead to higher rates for mortgages, auto loans and other borrowing.
Strong hiring has endured this year despite a miserable winter, which helped cause the economy to contract 0.2 percent at an annual rate in the January-March quarter.
The job gains show that employers are increasingly confident that their customer demand will keep growing. Their willingness to hire in anticipation of greater demand marks a shift from earlier in the economic recovery, when many businesses tended to hire only when essential.
A survey of purchasing executives at manufacturing firms released this week found that factories reported a scant rise in orders in June but ramped up hiring anyway.
Americans are finally spending more after boosting their savings earlier this year, in part because they're growing more confident about the economy. The Conference Board said Tuesday that its consumer confidence index reached 101.4, matching March's figure for the second-highest level since the recession.
That's good news for auto dealers and real estate agents. Auto sales jumped to nearly a 10-year high in May. The National Automobile Dealers Association forecasts that sales will top 17 million this year for the first time since 2001.
And home sales are running at an eight-year high and boosting construction. Permits to build homes jumped 11.8 percent in May to the highest level since 2007.
Most economists now expect economic growth to reach an annual rate of 2.5 percent in the April-June quarter and 3 percent in the second half of the year.