Employment Situation: Workers Return To Labor Force
July 6, 2018
Bottom Line: June saw another month of solid job creation with stronger than expected payroll growth and a surprise jump in labor force participation that drove the unemployment rate back up to 4.0% after hitting 3.8% in May. Average hourly earnings rose a touch less than expected as the new entrants came into the labor force. Manufacturing saw sharp gains, adding 36k jobs as the auto sector added 12k workers. Overall, this was another strong labor report and the increase in the labor force with modest wage growth suggests a reduction in labor slack is taking place as workers who had fallen out of the workforce appear to be returning, something that could give the Fed pause given Chair Powell's recent focus on the unemployment rate.
Payroll Employment rose by 213k in June, compared with market expectations for an increase of 195k. The prior 2 months were revised, higher in May by 21k and higher in April by 16k.
Government jobs ROSE by 11k. Consequently, private sector jobs ROSE by 202k. Private education jobs rose by 19k. State and Local education jobs rose by 3k.
Overall employment is now 1.6% ABOVE its year ago level, Over the past 12 months, 2,374k jobs have been created.
In June, the job gains were in
- Trade, Transportation & Utilities (+18k with -22k of those in Retail Trade),
- Professional & Business Services (+50k with the addition of 9.3k in Temp Help Services),
- Manufacturing (+36k),
- Education & Health Services (+35k),
- Leisure & Hospitality (+25k),
- Other Services (+16k),
- Construction (+13k), and
- Government (+11k).
The Unemployment Rate ROSE by 0.2 percentage points in June to 4.0%, compared with market expectations for a no change to 3.8%. Household employment rose by 102k while the labor force increased by 601k, resulting in an increase in the number of unemployed of 499k.
The Labor Force Participation Rate ROSE by 0.2 percentage points to 62.9%.
The Employment-Population Ratio was UNCHANGED at 60.4%.
The number of people Working Part-Time for Economic Reasons FELL by 210k to 4,662k. while Long-Term Unemployment ROSE by 289k to 1,478k (accounting for 22.5% of the unemployed), while the Mean Duration of Unemployment FELL by 0.1 weeks to 21.2 weeks.
There are now 6.6 million people officially unemployed. In addition, there are another 5,258k people who say they want a job but are not currently looking for one. Finally, another 4,662k people are working part-time because of slack economic conditions.
Hourly Earnings ROSE by 0.2% in June, below market expectations of 0.3%. Hourly earnings are now 2.7% ABOVE their year ago level.
Weekly Earnings also ROSE by 0.2%, the result of the change in hourly earnings and a steady workweek. Weekly earnings are now 3.0% ABOVE their year ago level.
The Average Workweek was UNCHANGED at 34.5 hours, in line the market consensus at 34.5 hours.
Article by Contingent Macro Advisors