(Reuters) - The U.S. economy created jobs at a record clip in June as more restaurants and bars resumed operations, further evidence that the COVID-19 recession was probably over, though a surge in cases of the coronavirus threatens the fledgling recovery.

The Labor Department reported Thursday that nonfarm payrolls increased by 4.8 million jobs in June, more than the 3 million jobs expected by economists polled by Reuters. That was the most since the government started keeping records in 1939. Payrolls rebounded 2.699 million in May.

The unemployment rate fell to 11.1% last month from 13.3% in May.

In another report, initial claims for state unemployment benefits totaled a seasonally adjusted 1.427 million in the week ended June 27, down from 1.482 million in the prior week.

MARKET REACTION:

STOCKS: The S&P 500 was recently up 1.5%.BONDS: Yields on the U.S. 10-year Treasury US10YT=RR were up at 0.6956% and two-year yields US2YT=RR fell to 0.1625%FOREX: The US Dollar Index =USD was recently off 0.1%

COMMENTS:

SEEMA SHAH, CHIEF STRATEGIST, PRINCIPAL GLOBAL INVESTORS, LONDON, UNITED KINGDOM

“Today’s number certainly adds to the growing evidence of a strengthening economy in early June. With all state-wide lockdown orders having been suspended by the time of the survey week, a labor market improvement makes sense. These numbers will inevitably take center stage ahead of the Congressional debate on the next round of coronavirus stimulus.”

“However, the US government cannot claim victory just yet. High-frequency data suggests that the labor market strength had started to wane later in the month, perhaps as households and businesses grew increasingly cautious about the rise in infection rates. Indeed, now, with the closings having been reversed or paused across 40% of the US, July’s job report may paint a much weaker story.”

“The market response is likely to be positive, but inevitably tinged with growing concerns that the recovery is already losing steam.”

MIKE BELL, GLOBAL MARKET STRATEGIST, J.P. MORGAN ASSET MANAGEMENT, LONDON, UNITED KINGDOM

“The strong rebound in US employment shows that the US economy is starting to reopen and would normally be an unambiguously positive sign that the economic recovery is under way. However, the rebound in employment is unfortunately being accompanied by a sharp rise in new infections in the US, which was of course what caused the initial collapse in employment in the first place.”

“While not all states are seeing new infections rise, a large proportion of the population live in states where the infection rate has been increasing recently. It is therefore too soon to say for certain that this recovery in employment sounds the all clear for investors.”

SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE

“Job growth came in ahead of expectations and shows that the labor market is continuing its healing process.”

“It will be important to watch the numbers in the coming months to see whether a renewed uptick in cases, and related shutdowns, has a major impact.”

“For now, the recovery in the labor market is enough to underpin a rebound in consumer spending and the broader economy, and we recommend investors continue to put cash to work, especially in large- and mid-cap equities, and the Information Technology, Consumer Discretionary, Health Care, Communication Services, and Financials sectors.”

LIZ ANN SONDERS, CHIEF INVESTMENT STRATEGIST, CHARLES SCHWAB, NAPLES, FLORIDA

“It was better than expected. I still think though that we’re not necessarily getting accurate data there.”

“The jobs data looks quite good but the unemployment claims data looks very weak so maybe it’s just a lag in getting accurate data. There’s still a lot of people that haven’t been able to get claims filed. Some are still waiting to hear back.”

“This is definitely good news. I just don’t know that we can feel 100% confident these are accurate.”

EDWARD MOYA, SENIOR MARKET STRATEGIST, OANDA, NEW YORK

“Everything still seems to be heading in the right direction. Right now, expectations are pretty high that the economy is rebounding back. Whether we continue to see reopening get slightly delayed, there are expectations of pent-up demand and we will see these jobs come back to life.”

“Everyone was expecting the BLS to correct some collection errors and just maybe we’re going to write this one off. But now this has come in pretty strongly and as a result we have seen risk appetite just strongly reflect that.”

JUSTIN HOOGENDOORN, HEAD OF FIXED INCOME STRATEGIC ANALYTICS, PIPER SANDLER, CHICAGO

“A lot of these numbers when you dig into the report —average weekly hours people are working, average hourly earnings — I think all of those things are just showing that we are getting back to work and that’s what’s going to allow the stock market to continue to perform well.”

“I think the Fed will continue to kind of keep rates low. But the key is not the level of rates. In my mind, the key is the slope of the curve. As long as that curve slope is positive, I think that shows really good things to come.”

DAVID BAHNSEN, CHIEF INVESTMENT OFFICER, BAHNSEN GROUP, CALIFORNIA

“The headline number is very strong and a lot of the jobs losses that were classified as temporary are indeed proving to be temporary.

“And it’s going to take a couple more months. We’re not out of the woods. If we avoid a secular or structural unemployment recession, and it turns out that we went a couple months with a huge spike in temporary unemployment, that’s going to be a total game changer for the economy.”

SUBADRA RAJAPPA, HEAD OF U.S. RATES STRATEGY, SOCIETE GENERALE, NEW YORK

“The lack of much reaction in the bond market is definitely a sign there is more noise than signal in this. Initial claims are still high and it’s really hard to square the circle in what we’re seeing on the payrolls side and improvements there versus initial and continuing jobless claims.”

“These improvements point to initiatives like the PPP and the Cares Act rather than a robust pickup in the economy from people coming back to work and going out and spending.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“We had good data here. It was a pleasant surprise. This is good news but you have to take into consideration this data reflect the reopening of the economy before the number of new (COVID-19) cases had been reported.”

“The fact that we saw unemployment go down to 11.1% is also good news but its still showing double-digits which is a problem going forward. The question is will this continue or stabilize going forward. I suspect we’re seeing stabilization.”

“On the negative side we have the trade deficit, which shot up, and which indicates slower economic activity.”

“These are erratic numbers. What does it mean for the markets? Initial reaction could be positive, but with double-digit unemployment, I would suspect that small gains for the market will be contained.”

PATRICK LEARY, CHIEF MARKET STRATEGIST, INCAPITAL, MINNEAPOLIS

“What we’re seeing from the payroll report is that the labor markets are healing, or at least had been healing in May and June. Part of the reason you’re not seeing a larger reaction from bonds specifically is that these numbers don’t take into consideration a possible second wave, which is what has markets nervous right now as we look at increased cases and hospitalizations.

“The report is good; it shows us healing. It shows that the labor markets can heal if the virus is no longer a concern. There’s reason to be optimistic, but at the same time cautious.”