195,000 new jobs in June; jobless rate 7.6%

Paul Davidson | USA TODAY

Employers added a better-than-expected 195,000 jobs in June, as the labor market advanced despite huge federal spending cuts and tax increases, and a eurozone recession.

The unemployment rate was unchanged at 7.6%, the Labor Department said Friday.

Economists had estimated that 165,000 jobs were added last month, according to a consensus forecast.

Also encouraging: job gains for April and May were revised up by a total 70,000. April's increase was revised to 199,000 from 149,000, and May to 195,000 from 175,000.

In June businesses added 202,000 jobs, while federal state and local governments cut 7,000. The growth was broad-based, with leisure and hospitality, professional and business services, retail, health care and finance all showing solid gains.

Other barometers of the labor market were mixed. The number of temporary workers rose by 9,500. The addition of contingent workers typically signals more hiring of permanent staffers.

But the underemployment rate — a broader gauge of joblessness that includes people who stopped looking for work and part-time workers who prefer full-time jobs, as well as the unemployed — jumped to 14.3% from 13.8%. The number of so-called involuntary part-time workers increased by 322,000 to 8.2 million.

The average workweek was unchanged at 34.5 hours. Employers typically increase the hours of existing workers before adding new ones. Average hourly earnings rose 10 cents to $24.01.

Leisure and hospitality led job gains with 75,000. Professional and business services added 53,000 and retailers, 37,000. The construction industry added 7,000 jobs while manufacturers cut 8,000.

The construction industry added 13,000 jobs. But manufacturers, still feeling the effects of a eurozone recession and the federal spending cuts, chopped 6,000.

Monthly payroll increases have averaged 202,000 this year, vs. 183,000 in 2012. "Employment growth continues to look more than strong enough to keep unemployment trending down," Jim O'Sullivan, chief U.S. economist of High Frequency Economics, said in a research note.

Last month's solid gains increase the likelihood that the Federal Reserve will begin dialing back its stimulus at its September meeting, RDQ Economics said in a research note. The Fed rattled stock and bond markets recently by saying it could rein in its monthly bond-buying later this year and end it by mid-2014, assuming the unemployment rate falls to 7% by then.

Expectations for strong employment gains were fueled by a payroll processor ADP's report this week that the private sector added 188,000 jobs in June.

Yet the economy has been mixed lately. Home sales have hit pre-recession levels and consumer confidence has surged for three straight months. But reports have shown consumer spending and manufacturing weakening. And last week, the government revised down its estimate for first-quarter economic growth to an annual rate of 1.8% from 2.4%.

Some analysts worry that $85 billion in across-the-board federal budget cuts and a January increase in payroll taxes may still inflict their most severe damage to the economy this summer.