Robust Job Gains Mask Soft Spots in Economy
By Jonathan House and Eric Morath
The U.S. economic expansion is entering its sixth year with a shiny exterior after the best stretch of job growth in almost a decade. But under the hood, the recovery's engine continues to sputter.
Overall job growth in June, when employers added 288,000 jobs, showed businesses gaining confidence and shedding the caution that has defined the labor market in the five years since the recession ended. The nation's jobless rate fell to 6.1%, the lowest level since September 2008, the Labor Department said Thursday, pushing the rate closer to what many economists consider full employment.
Yet those gauges of the labor market don't capture other weaknesses in the employment spectrum. Nor do they explain the mysteries of an economy that has been struggling to gain enough velocity to shake off its many ailments long after the recession ended.
Overall economic growth in the second quarter of the year may not prove robust enough to offset the first quarter's weather-induced 2.9% annualized rate of contraction. Consumer spending remains weak, a consequence of a labor market delivering new jobs but skimpy wage growth. And the share of Americans working or looking for work--the so-called labor-force participation rate--still hovers near its lowest levels since the late 1970s, despite steady hiring.
PMW Technologies Inc., a supplier of human-resources software called PeopleMatter, highlights the divide in the economy. The Charleston, S.C., firm has added 50 higher-paid software engineers and salespeople over the past year, boosting the company's benefits package to attract and retain high-skilled workers. It plans to add 100 positions over the next year, bringing its total headcount to 250.
Yet the company is witnessing the choppiness among its clients in the retail and food-services sectors. "The economy's very fragile," said Chief Executive Nate DaPore. "We're in a muddle-through economy."
Against this mixed backdrop, many investors are focusing on the positive signs and staying bullish about what's over the horizon. The optimism helped propel the Dow Jones Industrial Average above 17000 for the first time on Thursday.
The nature of the latest labor-market gains presents a challenge for Federal Reserve officials: Improvement in top-line metrics such as unemployment and inflation, both of which are nearing the central bank's targets, is spurring speculation about earlier-than-expected rate increases even though key gauges under the surface show the recovery remains soft.