WASHINGTON -- Employment increased more than forecast in June, wages picked up and the U.S. jobless rate held close to a four-year low as the world's largest economy weathered the effects of higher taxes and federal budget cuts.
Payrolls rose by 195,000 workers for a second straight month, the Labor Department reported Friday in Washington. The median forecast in a Bloomberg survey projected a 165,000 gain after a previously reported 175,000 increase in May. The jobless rate stayed at 7.6 percent, while hourly earnings in the year ended in June advanced by the most since July 2011.
Job gains, rising incomes and a rebound in housing are giving Americans reason to boost the spending that accounts for 70 percent of the economy. Stocks climbed after the report, while Treasuries dropped, sending the 10-year yield to the highest in almost two years, on expectations the data make it likelier the Federal Reserve will start trimming the $85 billion monthly pace of bond purchases in September.
"The job market is stronger," said Harm Bandholz, chief U.S. economist at UniCredit Group in New York and the top forecaster of payrolls over the past two years, according to data compiled by Bloomberg. "It's a good number, especially with the upward revisions." Fed "tapering is getting closer."
Revisions to the prior two months' payrolls reports added 70,000 jobs to the employment count in April and May. Gains in private employment overcame declines in gov
ernment payrolls. Private payrolls increased 202,000 in June after a 207,000 gain the prior month.
Retailers, professional and business services, health care and leisure and hospitality businesses led the payroll gains in June.
The improving labor market is encouraging some people to switch jobs. Among them is Brian Lambert, 44, who last month joined Red Robin Gourmet Burgers Inc., a chain based in Greenwood Village, Colo., as director of loyalty programs.
"There seem to be a lot of jobs available, it's just a matter of finding the right job," he said. "And then when you do, competition is fierce."
Factories reduced payrolls by 6,000 in June, while construction companies added 13,000, the most in three months, Friday's report showed. Automakers boosted employment by 5,100 workers, the most in four months.
Retailers added 37,100 jobs in June, with most of the increase coming from more hiring at motor vehicle dealerships and home-improvement outlets.
New cars and trucks sold in June at the fastest pace since 2007 as American drivers replaced aging vehicles and a rebound in housing construction moved trucks off dealer lots. That helped new car sales beat estimates last month, giving a lift to General Motors and Ford. Brisk sales are boosting hiring at dealerships.
"We would take 10 sales people in a heartbeat," said Don Hicks, owner of Shortline Auto Group in Aurora, Colo., which employs about 150 people at four dealerships. "If they were available and trained, or trainable, we'd take another five or six technicians. It's crazy trying to find people."
Auto industry sales climbed to a 15.9 million annualized pace, exceeding the 15.5 million median estimate of economists surveyed by Bloomberg. That's the best monthly pace since 16.1 million in November 2007 and compares to 14.3 million a year earlier, according to data from Ward's Automotive Group.
"We're a little island of prosperity," Hicks said. "We're leading the country out of recession."
Other manufacturers aren't doing as well as the recovery continues to struggle against crosscurrents. Americans are feeling the effects of a two percentage-point increase in the payroll tax that took effect in January and growth is being restrained by weakness overseas and federal budget cuts that began in March.
Friday's report gives Fed Chairman Ben Bernanke more reason to start trimming bond purchases intended to spur the economy and lower unemployment.
Bernanke said last month the central bank may start tapering this year, if the economy meets its forecasts, and end the purchases around the middle of next year. He said he expects the jobless rate to be around 7 percent when the Fed stops.
"These data likely keep the Fed on the taper trail," Tony Crescenzi, a strategist at Pacific Investment Management Co. in Newport Beach, Calif., said in an interview on Bloomberg Radio.
The household survey, used to calculate the unemployment rate, showed that more people entered the labor force and most of them were able to find work. The jobless rate in April fell to 7.5 percent, the lowest since December 2008.
The underemployment rate -- which includes part-time workers who'd prefer a full-time position and people who want to work but have given up looking -- rose to a four-month high of 14.3 in June percent from 13.8 percent the month before.