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Jobs Review Snapshot 222,000 nonfarm payrolls jobs were added in June, which was more than expected. The headline unemployment rate (U-3) ticked up slightly to 4.4% as more people entered the labor force. The employment-to-population ratio and labor force participation rate both increased.

	Details The Bureau of Labor Statistics (BLS) reports a 222,000 gain in nonfarm payroll jobs, of which 187,000 were in the private sector. The largest private-sector job gains came from health care and social assistance (+59,100), leisure and hospitality (+36,000), and business and professional services (+35,000). Private-sector job losses occurred in information (-4,000) and motor vehicle and parts manufacturing (-1,300). The government sector added 35,000 jobs—the net gain was due entirely to local government hiring.
	The employment-to-population ratio ticked up from 60.0% to 60.1%. The overall labor force participation rate (LFPR) increased from 62.7% to 62.8%. The prime working-age (25 to 54) labor force participation rate also rose from 81.5% to 81.6%; during the previous business cycle’s expansion (December 2001 to November 2007), it averaged 83%.[1]
	The headline unemployment rate (U-3) ticked up from 4.3% to 4.4%. The “real” unemployment rate (U-6)[2] increased from 8.4% to 8.6%.  For all private-industry workers, average hourly earnings (AHE) were 2.5% higher relative to last year while average weekly earnings (AWE) were 2.8% higher (series not shown in graphs).[3] The larger increase in AWE relative to AHE was due to an increase in average hours worked (AWE equals AHE times average hours worked).
	The AHE of production and nonsupervisory workers was 2.3% higher relative to this time last year, while AWE was 2.6% higher. The increase in AWE relative to AHE is attributable to an increase in average hours worked. JEC prefers the production and nonsupervisory workers measure of wages as more representative of the average worker.[4] During the previous expansion, the AHE and AWE of production and nonsupervisory workers each increased an average of 3% per year, whereas in the current expansion they have increased at an average annual rate of only 2.1% and 2.4%, respectively.

Context

Job creation in June easily beat expectations. The uptick in the unemployment rate was due to more people entering the labor force. This encouraging development lends credence to JEC’s concept of constrained economic potential, which  means that policy choices by the last administration put an artificial ceilling on economic growth and left millions of Americans stranded on the sidelines of the labor market. This may have contributed to a gap between qualifications for employment and  worker skills, as the number of job vacancies, which as of the end of April stood at 6 million, has exceeded the number of hires (5 million) since late 2014. JEC explores this issue at its upcoming hearing.

Noteworthy

Nonfarm payroll job growth for April was revised up from 174,000 to 207,000 (final estimate).  For May, it was revised up from 138,000 to 152,000 (second estimate). The July Employment Situation release is scheduled for Friday, August 4, at 8:30am.

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[1] JEC considers the prime working-age LFPR, which measures the ratio of those aged 25 to 54 who are currently employed or have sought work in the past four weeks, a better indicator because demographic factors are affecting the overall LFPR.