US economy boosted by 200,000 new jobs
for June show positive signs for recovery as Dow Jones leaps in response
Stocks surged in the US as official figures showed the economy had gained nearly 200,000 jobs in June, and a revision of previous low estimates saw an extra 70,000 added in April and May.
The unemployment rate remained the same at 7.6 per cent, but even this was a positive sign as it meant more people had started to look for work – those who aren’t looking are not included in government figures.
Consumer confidence has hit a five-year high, driving up sales of homes and cars. Hiring in June was particularly strong in the retail and financial services sectors.
"The numbers that we're seeing are more sustainable than we thought," said Paul Edelstein, US economist at IHS Global Insight, a forecasting firm. "We're seeing better job numbers, the stock market is increasing and home prices are rising."
Seemingly in response to the employment figures, the Dow Jones industrial average jumped 147 points, nearly 1 per cent. The yield on the 10-year Treasury note soared to 2.73 per cent, its highest point since August 2011.
The good news could see the government easing off its bond-buying policy. It has been taking $85 billion in Treasury and mortgage bonds each month since late last year. The purchases pushed long-term interest rates to historic lows, fueled a stock rally and encouraged consumers and businesses to borrow and spend.
John Silvia, chief economist at Wells Fargo, said he thinks the government will announce a reduction, perhaps to $75 billion (£50 billion) a month, at its September policy meeting.
June also saw an increase in average hourly pay, up 10 cents to $24.01. Ryan Sweet from Moody’s Analytics called it “the standout feature of this report”.
"The tide is continuing to turn for the consumer," he said. "The consumer is going to continue to be able to shoulder this recovery."
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