By Lucia Mutikani
WASHINGTON (Reuters) - U.S. employment growth jumped in June and the jobless rate closed in on a six-year low, decisive evidence the economy was growing briskly heading into the second half of the year.
Nonfarm payrolls increased by 288,000 jobs last month and the unemployment rate fell to 6.1 percent from 6.3 percent in May, the Labor Department said on Thursday. Data for April and May were revised to show a total of 29,000 more jobs created than previously reported.
In addition, the ranks of the long-term unemployed shrank and the share of Americans with a job hit its highest level since August 2009. Job gains were widespread across sectors and there were few signs of inflationary wage pressures.
"It's a strong report, there is no question about it. The labor market is improving at a seemingly stronger rate than before, the slack is being absorbed, we are chipping away," said Josh Feinman, chief global economist at Deutsche Asset & Wealth Management in New York.
Employment has now grown by more than 200,000 jobs in each of the last five months, a stretch not seen since the technology boom in the late 1990s. That added to signs a plunge in economic output in the first quarter was a weather-driven anomaly.
Job growth averaged 231,000 per month in the first half of the year, the best start since 2006.
U.S. stocks rose on the data, with the Dow Jones industrial average .DJI closing above the 17,000 threshold for the first time. Prices for U.S. Treasuries fell and the U.S. dollar advanced against a basket of currencies, as traders bet on an earlier interest rate hike from the Federal Reserve.
Rate futures moved to show a 58 percent probability of an increase in June 2015, up from 51 percent. JPMorgan moved up its forecast for a rate hike to the third quarter of next year from the fourth quarter, while Goldman Sachs acknowledged it could come sooner than its call for the first quarter of 2016.
"With additional, similar reports in the coming months, we believe the timing of the Fed policy turning point could be moved from late in 2015 to earlier in the year," said Doug Handler, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
LABOR MARKET TIGHTENING
The jobless rate reached its lowest level since September 2008 despite a swelling of the labor force.
Nevertheless, the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, was steady at 62.8 percent, a low struck in December for the first time since 1978.
A broader measure of unemployment, which includes people who want a job but have given up searching and those working part-time because they cannot find full-time jobs, fell to 12.1 percent, the lowest level since October 2008.
The unemployment rate for Americans who have been out of work for at least 27 weeks fell two-tenths of a percentage point to 2.0 percent, the lowest since February 2009.
These long-term jobless accounted for 32.8 percent of the 9.5 million jobless Americans, down from 34.6 percent in May. The median duration of unemployment fell to a more than five-year low of 13.1 weeks.
Among those who have benefited from an improving jobs market is Joseph Fontanez, 21, who recently got a job as a chef at Little Muenster, a cafe in the new Hudson Eats food court in Lower Manhattan.
Before getting the position two weeks ago, he had been for 15 interviews in a six-month period without getting a job. "It was a struggle," he said.
But now things are looking up. "I've been here two weeks and I've already got another job opportunity here in the food court," said Fontanez, who is considering working two jobs to help support his family, including a two-year-old daughter.
With auto sales strong, motor vehicle and parts dealers added about 12,000 jobs in June. "We are hiring anybody who is qualified," said April Ancira, vice president of the Ancira Auto Group in San Antonio, Texas.
And Ancira said she would prefer to hire someone who had been unemployed for a long period rather than a candidate who had been job hopping. "The long-term unemployed may even be more motivated," she said.
STILL SLACK IN JOBS MARKET
Still, there was a jump in the number of people working part-time even though they want a full-time job.
Fed Chair Janet Yellen has cited low labor force participation and high levels of long-term unemployed and part-time workers as evidence of job market slack that could allow the central bank to bide its time before raising borrowing costs.
The Fed has held overnight rates near zero since December 2008.
"We believe that continued labor market pessimism from the Fed will only serve to boost concerns about inflation," said Drew Matus, an economist at UBS in New York. "We continue to believe that there is little slack in the labor market."
Job gains were spread across all sectors. Services industries employment jumped by 236,000, the biggest gain since October 2012, while manufacturing payrolls increased by 16,000, an 11th straight monthly rise. Construction jobs advanced for the sixth consecutive month and government employment increased by 26,000.
The length of the average workweek held at a post-recession high of 34.5 hours. Total hours worked rose 0.2 percent.
Separate data on Thursday showed services sector activity expanded strongly in June, while a third report showed exports hit a record high in May, helping to narrow the U.S. trade deficit. Still, trade is expected to weigh on growth in the April-June period for a second consecutive quarter.
(Reporting by Lucia Mutikani,; With Reporting by Natasja Sheriff and Jim Forsyth; Editing by Tim Ahmann, Paul Simao and Martin Howell)
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