A blockbuster report Thursday on employment growth in June revealed a small but growing share of higher-paying jobs, an encouraging sign that eventually could mean stronger income gains for consumers.
Many of the 288,000 jobs added last month are concentrated in low-wage industries, consistent with payroll additions throughout the 5-year-old economic recovery. Retailers, for example, added 40,000 jobs, and leisure and hospitality added 39,000, including 33,000 by restaurants and bars.
But architectural and engineering services added 7,200 jobs — the most in more than two years. Employers also added a healthy share of accountants, computer professionals and management consultants. Payrolls for financial, insurance and real estate firms jumped by 17,000, the most since March 2012.
"We're starting to see a movement in the right direction," says Diane Swonk, chief economist of Mesirow Financial. "You're seeing some meat on the bones."
But, "it's still not enough to lift wages" more sharply, she says.
Earnings increased just 2% over the past 12 months, in line with gains thus far in the recovery. The growth of higher-paying jobs, along with a tightening labor market, should lead to bigger pay increases in coming months, according to Swonk and Bob Baur, chief global economist of Principal Global Investors.
The jobless rate fell to 6.1% vs. 6.3% in May. That's the lowest it's been since September 2008.
Economists had estimated that 215,000 jobs were added last month.
The economy has now gained at least 200,000 jobs a month for the past five months — the first such stretch since September 1999-January 2000.
In June, businesses added 262,000 jobs, with professional and business services, retail and health care leading the broad-based gains. Federal, state and local governments added 26,000.
Meanwhile, job gains for April and May were revised up by a total 29,000. April's increase was revised to 304,000 from 282,000 and May's to 224,000 from 217,000. April's total marks the first time monthly job gains topped 300,000 since January 2012
Payroll additions have averaged 272,000 the past three months and 231,000 for the year, vs. 194,000 in 2013.
Baur says faster job growth is feeding into a virtuous cycle, in which stronger payroll gains lead to higher consumer spending and further employment advances.
With the average workweek for manufacturing employees at a record high of 41.1 hours, he says that many businesses "are not going to have a choice but to add payroll" as sales strengthen.
Other labor market indicators are improving as well. Initial claims for unemployment benefits have fallen to pre-recession levels, and surveys of service-sector employment are indicating a pickup in hiring. Outplacement firm Challenger Gray & Christmas said Thursday that announced job cuts fell to 31,434 in June from 52,961 in May and are down 5% so far this year.