Labor Review: Context for the June Labor Report
Last Friday’s employment report from the Bureau of Labor Statistics (BLS) shows higher than expected job growth for the month of June. In the establishment survey, nonfarm payroll job numbers grew 287,000 compared to growth expectations of 180,000. Private payrolls grew by 265,000. Nonfarm payroll job growth was revised down from 38,000 for May (second estimate) to 11,000, with private-sector payroll jobs falling by 6,000. Nonfarm payroll revisions are down a combined 6,000 for April (third estimate) and May (second estimate). In the household survey, the unemployment rate increased to 4.9%, attributable to more Americans entering the labor force looking for work. However, total employed persons increased by only 67,000. The labor force participation rate increased 0.1 percentage point to 62.7%.
June Jobs Report Data |
Previous May Data |
Revised May Data |
June Forecast |
June Data |
Establishment Survey |
|
|
|
|
Nonfarm Payrolls Change |
38,000 |
11,000 |
180,000 |
287,000 |
Private Payrolls Change |
25,000 |
-6,000 |
170,000 |
265,000 |
Average hourly earnings (% chg.) |
0.2% |
0.2% |
0.2% |
0.1% |
Household Survey |
|
|
|
|
Unemployment Rate (U-3) |
4.7% |
4.7% |
4.8% |
4.9% |
“True” Unemployment Rate (U-6) |
9.7% |
9.7% |
- |
9.6% |
Labor Force Participation Rate (%) |
62.6% |
62.6% |
- |
62.7% |
16-64 years old |
72.7% |
72.7% |
- |
72.8% |
25-54 years old |
81.0% |
81.0% |
- |
81.2% |
Employment to Population Ratio (%) |
59.7% |
59.7% |
- |
59.6% |
Labor Force Change |
-458,000 |
-458,000 |
- |
414,000 |
Population Growth (16+ years old) |
205,000 |
205,000 |
- |
223,000 |
Source: BLS, BEA, Haver Analytics, Bloomberg Econoday
LABOR TRENDS FOR WORKERS, JOB SEEKERS AND FAMILIES
THE BIGGER PICTURE
Despite the “recovery”, the labor force participation rate remains significantly below even the June 2009 end of the recession. A Wall Street Journal survey of economists estimates that 145,000 jobs per month are needed to absorb new entrants into the labor market and keep the unemployment rate constant. Given the three-month average of 147,000 payroll jobs added, it suggests the labor market is still extremely fragile.
- The Joint Economic Committee will hold a hearing on Tuesday, July 12th at 2 p.m. entitled, “Encouraging Entrepreneurship: Growing Business, Not Bureaucracy.” Members hope to understand the ongoing declining trends in entrepreneurial activity and business dynamism. If bureaucracy shackles entrepreneurs, the engine of economic progress will stall even more.
- The Financial Times reported that after the May 2016 job numbers were released, Fed officials were backing away from an anticipated rate hike in late July. Now, in light of Brexit contrasted with June’s higher than expected job growth, the Fed’s upcoming direction is less certain.
UNDERLYING DETAILS
The unemployment rate ticked upward from 4.7% in May to 4.9% in June. The increase is attributable to a greater civilian labor force participation (+414,000), largely due to an increase of 347,000 in the number of people who are unemployed, since those without a job but actively looking for work are included in the labor force. June’s household employment numbers shows people working part-time for economic reasons fell by 587,000. The number of workers who are unemployed for 27 weeks or more (long-term unemployed) increased by 94,000.
- The BLS establishment survey finds the leisure and hospitality industries added 59,000 jobs in June. The healthcare and the social assistance sector added more than 58,000 jobs. Employment in financial activities increased 16,000 in June. Employment in information went up 44,000. As mentioned last month, a strike comprising an estimated 35,000 payroll jobs in telecommunications marginally contributed to the grim May payroll numbers. As the strike ended in June, the telecom sector added 28,000 jobs. Employment in the retail trade sector went up by 30,000. Mining continues its downward trend, having shed nearly 6,000 jobs. Since September 2014, mining has lost 211,000 jobs.
- ADP’s National Employment Report estimates that private-sector employment increased 172,000 in June. Employment by the service-providing sector increased by 208,000 while employment in the goods producing sector decreased by 30,000. Most of these gains (+95,000) came from small businesses (1-49 employees), followed by medium-sized businesses with 50 to 499 employees (+52,000), and lastly large businesses with 500 plus employees (+25,000). ADP’s employment numbers, though useful, are not necessarily a reliable predictor for actual payroll jobs numbers released by the BLS.
- The ISM non-manufacturing survey for June reveals that economic activity grew for the 77th consecutive month. The Non-Manufacturing Index (NMI) increased from 52.9% in May to 56.5% in June (above 50% indicates growth). The ISM manufacturing survey for June indicates that the manufacturing sector expanded for a fourth consecutive month from 51.3% to 53.2%. The employment index moved up from contractionary territory at 49.2% in May and April to 50.4%.
- The next BLS employment situation report for initial July employment numbers and revisions for May and June data are scheduled for release on Friday, August 5, 2016, at 8:30 a.m. ET.