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June jobs look good for Hillary, but here's what could go wrong

Democratic presidential candidate Hillary Clinton crosses her fingers as she talks with a worker at Galvanize, a learning community for technology, in Denver, U.S. June 28, 2016.
Rick Wilking | Reuters

The June jobs report will quite understandably get lost amid the chaos and heartbreak following the murder of at least five police officers in Dallas and protests over the shooting of black men by police in Louisiana and Minnesota.

But the surprisingly strong report, showing a gain of 287,000 jobs, is still an important moment for the economy and the 2016 election. The June numbers suggest that the sharp decline to a revised 11,000 gain in May was likely an aberration and that the trend remains around 150,000 a month, lower than last year's average of 229,000 but still fairly robust for this point in the economic cycle.

The figures will come as a great relief to Hillary Clinton's campaign and to the White House, which does not want President Barack Obama's second term to end on an economic slowdown.

Labor Secretary Thomas Perez, who has been talked about as a potential vice president pick by Clinton, celebrated the figures in an interview on CNBC.

"We are a resilient economy and you see it in this report," he said. "It's really important when you have a lower-than-expected month as we had [in May] not to jump to conclusions."

The report was mostly good throughout with 414,000 workers returning to the labor force, explaining the increase in the jobless rate from 4.7 percent to 4.9 percent. The labor force participation rate ticked up to a still low 62.7 percent. Wages rose by 2 cents are now up 2.6 percent versus last year.

The broader "U-6" reading of unemployment, which includes part-time and discouraged workers, dropped to 9.6 percent, the lowest level since April 2008. The return of striking Verizon workers added 35,000 to the jobs total.

There is little chance the June pace will be sustained but the increase in wages and return to a solid trend will likely boost Clinton's argument for allowing Democrats to remain in control of the White House. Following the trend of recent years — terrible winters followed by spring and summer recoveries — economic growth is expected to pick up in the second half of the year with gross domestic product expected to rise close to 3 percent in the second quarter.

Trends in wages and hiring have a direct impact on voting behavior and right now they make presumptive Republican nominee Donald Trump's effort to defeat Clinton — already a heavy lift given his historically low favorability ratings — even tougher. However, the national numbers matter far less in the presidential campaign than figures at the state level. And the news there is not all good for Clinton.

"There are pockets of weakness in North Carolina, Ohio, Pennsylvania and Virginia," Moody's Analytics' chief economist, Mark Zandi, said in an email. "Global competition has hurt manufacturing dependent parts of these states, and the recent slump in energy prices is also hurting."

In addition, the biggest job gains in June came in leisure and hospitality, with an increase of 59,000. That is also the lowest-paying sector tracked by the Labor Department. The increase in low-paying jobs and weakness in some critical swing states suggest that Trump retains a window to appeal to disaffected blue-collar workers.

A single strong jobs report is not likely to drive the Federal Reserve to speed up its timetable for another rate increase given continuing market turmoil following the Brexit vote in the U.K. But if the July numbers also come in very strong with further wage gains, a hike in September is not impossible.

The Clinton campaign, fearing a market sell-off in the face of a Fed hike, would clearly prefer that the central bank hold off until at least its December meeting before moving on rates.

But if Fed Chair Janet Yellen and the rest of the Open Market Committee become convinced in August that upward pressure on wages is real they may feel compelled to act. Central bankers always say they ignore the political calendar. And mostly they do. But given the option, they generally try and stay out of the news during the heart of a national election. The question is whether they feel they have that option.

—Ben White is Politico's chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet Politico Morning Money []. Follow him on Twitter @morningmoneyben.