Employment Increase Broad-Based in June; ECB Gives Forward Guidance on Interest Rates
- Jul 08, 2013
The jump in employment reported by the Bureau of Labor Statistics on Friday, a nationwide increase of 195,000 jobs, was fueled by a number of sectors — leisure and hospitality, professional and business services, retail trade, healthcare, and financial activities. Leisure and hospitality, for example, added 75,000 jobs in June. Monthly job growth in the industry has averaged 55,000 thus far in 2013, almost twice the average gain of 30,000 per month in 2012.
Employment in professional and business services was also strong for the month, rising by 53,000 in June. Retail trade employment increased by 37,000 in June, and employment in wholesale trade continued to trend up, adding 11,000 jobs. Health care—a persistent growth industry as the population grays and the pool of the insured Americans expands because of the Affordable Care Act—continued to add jobs in June, with a net gain of 20,000.
Part-time employment was another driver in the monthly increase. According to the BLS, the number of people “employed part time for economic reasons” increased by 322,000 to 8.2 million in June.
On the other hand, federal government employment continued to trend down in June, dropping by 5,000 positions. All together, the federal government has shed 65,000 jobs over the past 12 months. State and local government employment, which contracted radically in the years after the recession, has more-or-less stabilized in more recent years, however.
ECB Gives Forward Guidance on Interest Rates
On Thursday, European Central Bank President Mario Draghi announced–during a press conference after the central bank confirmed that it was keeping its main refinancing rate at 0.5 percent–that interest rates in the eurozone were going to remain that low or even drop lower for “an extended period of time.” That’s because, as the central banker put it, “Euro-area economic activity should stabilize and recover in the course of the year, albeit at a subdued pace. The risks surrounding the economic outlook for the euro area continue to be on the downside.”
It was an unprecedented move by the ECB, which typically hasn’t given the markets forward guidance. Not long after Draghi made his announcement, the Bank of England similarly offered forward guidance, also with a promise of low rates for an extended time. The reaction of investors worldwide, who presumably saw the news as a counterweight to Ben Bernanke’s promise of a taping QE3, was nearly instantaneous – markets were up everywhere, including futures on the U.S. exchanges, which were closed for Independence Day.
Sure enough, on Friday, Wall Street reacted positively to the news. The Dow Jones Industrial Average gained 147.29 points, or 0.98 percent, while the S&P 500 and the Nasdaq advanced 1.02 percent and 1.04 percent, respectively.