June Jobs Report: June Takes Back May, But Deceleration Remains

by: Hale Stewart

By New Deal Democrat

HEADLINES:

  • +287,000 jobs added (would have been 252,000 except for the Verizon (NYSE:VZ) strike)
  • U3 unemployment rate rose from 4.7% to 4.9%
  • U6 underemployment rate rose from 9.7% to 9.8%

Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates

  • Not in Labor Force, but Want a Job Now: declined -231,000 from 5.923 million to 5.692 million
  • Part time for economic reasons: declined -587,000 from 6.430 million to 5.843 million
  • Employment/population ratio ages 25-54: unchanged at 77.8%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up +$.04 from $21.47 to $21.51, up +2.4% YoY. (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel to come closer to the situation for ordinary workers.)

April was revised upward by +21,000, but May was revised downward by -27,000, for a net change of -6,000.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed.

  • The average manufacturing workweek was unchanged at 41.8 hours (but May was revised down -0.1 hours. This is one of the 10 components of the LEI.
  • Construction jobs were unchanged. YoY construction jobs are up +217,000.
  • Manufacturing jobs increased by +14,000, and are down -29,000 YoY
  • Temporary jobs - a leading indicator for jobs overall - increased by 15,200 (this made a peak in December, and seems to be stabilizing now).
  • The number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by +211,000 from 2,239,000 to 2,418,000. The post-recession low was set 10 months ago at 2,095,000.

Other important coincident indicators help us paint a more complete picture of the present:

  • Overtime was unchanged at 3.2 hours.
  • Professional and business employment (generally higher-paying jobs) increased by +38,000 and are up +497,000 YoY.
  • The index of aggregate hours worked in the economy rose by 0.2 from 105.2 to 105.4
  • The index of aggregate payrolls rose by 0.4 from 128.6 to 129.0.

Other news included:

  • The alternate jobs number contained in the more volatile household survey increased by +67,000 jobs. This represents an increase of 2,375,000 jobs YoY vs. 2,164,000 in the establishment survey.
  • Government jobs rose by +22,000.
  • The overall employment to population ratio for all ages 16 and above fell from 59.7% to 59.6% m/m but is up +0.3% YoY.
  • The labor force participation rate rose 0.1% from 62.6% to 62.7% and is now up +.0.1% YoY (remember, this includes droves of retiring Boomers).

SUMMARY

This month basically took back last month. Clearly, there is some seasonality glitch at work, and the best course is simply to average the two months. This gives us a 2-month average of +149,000 jobs added, and -0.05% monthly in the various unemployment rates. That is progress, but it is continuing the decelerating progress that we have seen for the last year.

It is mildly encouraging that temporary jobs appear to be stabilizing, but they remain below their peak of 6 months ago. But it is just as mildly discouraging that manufacturing jobs are stalled, and higher paying professional jobs as well as construction jobs are slowing down strongly.

So, late cycle deceleration remains the takeaway.