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The rise in the United States unemployment rate isn’t bad news

09 July 2018

While the sunny outlook led Federal Reserve officials last month to boost the number of interest-rate hikes they expect in 2018, an intensifying trade war threatens to sap economic momentum, and a shrinking pool of qualified workers may slow the pace of employment gains.

The report showed that Canada's trade surplus with the US narrowed to $3.3 billion in May, from $3.7 billion April, as more imports headed north across the border and south-bound exports decreased. At the same time, more people entered the labour force to look for work, helping push the unemployment rate up for the first time in nearly a year.

Average hourly wage growth, which is closely watched by the Bank of Canada ahead of its rate decisions, remained firm last month at 3.6 per cent. "While initial jobless claims rebounded during the payroll month-averaging 224k vs. 214k in May-they remain at very low levels, and continuing claims have continued to decline".

The result of these policies in the USA and internationally has been a steep decline in the social position of the working class and a precipitous rise in social inequality, with over 90 percent of income gains going to the top 10 percent of households in the United States over this period.

Minutes of the Fed's June 12-13 policy meeting published on Thursday were upbeat on the labor market.

Gross domestic product growth estimates for the April-June period are as high as a 5 percent annualized rate, more than double the 2.0 percent pace logged in the first quarter.

The June jobs data showed an economy that may be on the cusp of producing stronger pay growth, something that could be disrupted if additional tariffs are imposed.

On Friday, the world witnessed the imposition of new tariffs by the U.S. and China on goods worth $34bn from each of the two countries. The category, which includes computer systems designers, engineers, consultants and administrative staff, added 50,000 jobs during a robust month of hiring.

Whether the unemployment rate jumped by 0.2 of a percentage point or 0.3, both were good signs for the economy. Huh?

Altogether, 285,000 new jobs have been added in the manufacturing sector in the past year.

The picture was brighter for the leisure and hospitality industry.

Manufacturing added 36,000 jobs, the most since December.

One notable weak spot was the retail sector which lost 22,000 jobs in the month. The reason for the rise in the unemployment rate was "a stampede of people back into the labour force", he said.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in June.