U.S. Markets closed

Fed QE Taper Seen

June marked the third straight month of payroll growth near 200,000, data showed Friday, backing expectations the Federal Reserve will start tapering monetary stimulus after its September policy meeting.

Employers added 195,000 jobs last month, and upward revisions to May and April totaled 70,000, the Labor Department said. Analysts predicted 161,000 for June. Average gains for the year's first half top 200,000, vs. the year-ago pace of 185,000.

"A stronger-than-expected employment report — more than strong enough to keep the Fed on track for tapering in September," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics, in a client note.

A separate household survey showed the unemployment rate remained 7.6%, as the workforce grew. Analysts saw a dip to 7.5%. Fed chief Ben Bernanke has targeted 7% as sufficient to justify ending quantitative easing.

Full Speed On Part-Time

But a measure of underemployment that includes workers who want more hours leapt to 14.3% from 13.8%.

The number of involuntary part-timers jumped by 322,000 to 8.23 million. Full-time positions fell 240,000 in the household survey. Since January 2008, involuntary part-time jobs are up 3.38 million, while full-time jobs are down 5.44 million.

U.S. stock indexes still rallied, though homebuilders retreated as the 10-year Treasury yield spiked 21 basis points to a two-year-high 2.71%.

The Fed is definitely closer to scaling back QE and will likely announce it at the September meeting then execute it in October, said Michael Gregory, a senior economist at BMO Capital Markets.

"It's not going to take many more months," he said.

While the jobless rate held steady, it should resume a downward trend if payroll growth continues about 200,000, he added.

The labor force participation rate ticked up for a second month in a row. But at 63.5%, it is still comparable to 1981 levels.

The average workweek of production workers and nonsupervisors stayed at 33.7 hours and has been virtually unchanged over the last two years.

Looming ObamaCare mandates, some of which have been delayed recently, are seen discouraging employers from hiring full-time, permanent staff. The pace of temporary hiring was halved in June, but temp jobs are up 168,000 over the past year.

A narrower range of industries added jobs last month, with the biggest increases continuing to come in low-wage sectors like leisure and hospitality. Rank-and-file workers overall saw annual wage growth remain at 2%.

Robust staffing in leisure, which added 75,000 last month, is a sign of upbeat consumers, who are spending more despite higher payroll taxes and federal budget cuts this year, Gregory said. "Consumer confidence has held up remarkably well.

Retailers added 37,100 jobs and professional services 53,000.

Meantime, manufacturing's fourth straight monthly job loss is due in part to the weak global economy. But auto plants kept hiring, and the housing recovery helped construction firms add 13,000. Governments shed 7,000.