WASHINGTON – U.S. employers added a robust 195,000 jobs in June and many more in April and May than previously thought. The job growth suggests a stronger economy and makes it more likely the Federal Reserve will slow its bond purchases before year's end.
The unemployment rate remained 7.6 percent. That was because more people started looking for work in June — a healthy sign. People without a job aren't counted as unemployed unless they're looking for one.
Hiring "continues to look more than strong enough to keep unemployment trending down ... and probably more than strong enough to lead to Fed tapering starting in September," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.
The Fed's bond purchases have kept borrowing rates low to encourage borrowing and spending. A pullback in its bond buying would likely send rates up.
Pay rose sharply last month, the Labor Department's monthly jobs report Friday showed. Pay has now outpaced inflation over the past year.
Stocks opened sharply higher before sharply trimming their gains by midmorning. The yield on the 10-year Treasury note jumped from 2.56 percent to 2.69 percent, its highest level since August 2011. That's a sign that investors think the economy is improving.
The economy has added an average 202,000 jobs a month for the past six months, up from 180,000 in the previous six. Hiring and consumer confidence have risen despite higher taxes and federal spending cuts that kicked in this year.
Friday's report showed the economy added 70,000 more jobs in April and May than the government had previously estimated — 50,000 in April and 20,000 in May. Average hourly pay rose 10 cents to $24.01, 2.2 percent higher than a year ago.
The hotels, restaurants and entertainment industry added 75,000 jobs last month. Retailers added 37,000.
The health care industry added 20,000, construction 13,000. Temporary jobs rose 10,000. But manufacturing shed 6,000.
Many of the new jobs were part time. The number of Americans who said they were working part time but would prefer full-time work jumped 322,000 to 8.2 million — the most in eight months.
In June, 177,000 more people started looking for jobs, and most found them. The increase in job seekers suggests that Americans think their prospects have improved. The number of unemployed was largely unchanged in June at 11.8 million.
The percentage of Americans either working or actively searching for work is known as the "labor force participation rate." The participation rate has risen for two straight months to 63.5 percent.
Still, the rate has been generally declining since peaking at 67.3 percent in 2000. That's partly the result of baby boomers retiring and dropping out of the workforce.
Despite the solid pace of hiring in June, the economy is growing only sluggishly. It expanded at a 1.8 percent annual rate in the January-March quarter. Most analysts expect growth at roughly the same subpar rate in the April-June quarter.
Weak economies overseas cut demand for U.S. exports in May. That led some economists to predict that growth in the second quarter might be slower than forecast.
Still, many areas of the economy are improving. The Fed's low-rate policies have led more Americans to buy homes and cars. They also helped boost stock and home prices in the first half of the year, increasing wealth and lifting consumers' confidence to its highest level in 5½ years.
Auto sales in the January-June period topped 7.8 million, their best first half since 2007, according to Autodata Corp. and Ward's AutoInfoBank. Sales of previously occupied homes exceeded 5 million in May, the first time that's happened since November 2009. New-home sales rose at their fastest pace in five years.
Though fewer exports have hurt manufacturing, factories fielded more orders in May. And a measure of business investment rose for a third straight month.
Diane Swonk, chief economist at Mesirow Financial, said she thinks the improving job market will lead the Fed to taper its bond purchases starting in September. She predicts the Fed will announce that it will reduce its monthly purchases from $85 billion to $65 billion and by an additional $20 billion in December.
Swonk said she thinks the Fed will end its bond buying altogether in the second half of 2014.