Today's Topline Jobs Numbers Masks Weakness Under The Hood
- Government, government-supported, and low-wage sectors made up most of the jobs creation.
- Jobs creation in those sectors generally do little to signal GDP growth.
- Troubling signs in the auto sector will likely lead to layoffs from the current quarter forward.
- The 3% GDP growth that President Trump had hoped for seems fatuous right now, absent nearly immediate fiscal stimulus.
- Revisions to prior months' data powered a more robust three months average jobs data.
The June top line jobs report print this morning was generally very positive, with 222,000 new jobs created. Unemployment printed at 4.4%, up Slightly from the May rate of 4.3%. The U-6 unemployment rate also increased from 8.4% in May to 8.6% in June.
Average three-month unemployment printed at 194,000 jobs, owing largely to revisions for April and May, which were revised up from 174,000 to 207,000 and 138,000 to 152,000, respectively. That average three month average rate is up substantially from the abysmal 121,000 three month average that we reported with the May jobs report.
Turning to our quarterly analysis of wage data, average monthly wages also increased by about $4 per week from May, up nominally by 2.76% over June last year. That's about a 1% real wage increase over the 1.7% trimmed mean PCE produced by the Dallas Fed.
Turning to sector job creation, we are seeing much of the jobs growth in this June report in sectors like Government, (35,000 jobs), Education, and Healthcare and social assistance (59,100 jobs) much as we have seen for the last several years. Jobs in these sectors tend not to signal a particularly robust economy because they are largely funded by governmental expenditures and taxes.
We also note that 36,000 of the new jobs created were in the very low paying Leisure and Hospitality sector, where average wages are around $400 per week.
On the positive side, relatively higher-paying Construction Sector jobs increased, as did jobs in the Durable Goods Manufacturing, and Financial activities, Mining and Logging and Utilities.
Nevertheless, it seems from a glance at our exclusive chart of jobs creation by average weekly wages that job creation has either decreased or simply increased at a small rate over last month in sectors that signal a more robust economy. For example, if we take away the Government sector, publicly supported sectors like Education, Healthcare and Social Services, and the low wage Leisure and Hospitality sectors, totaling over 130,100 jobs created this month, we come up with a far less robust 91,900 jobs.
This, coupled with the likelihood of layoffs in the auto sector and related suppliers due to weak auto demand, and "sticky" longer-term interest rates (even in view of rising short-term rates) causes us to reiterate our concerns about the current quarter (i.e., 2017Q3) into the first half of 2018 that we discussed last month.
Absent some successful fiscal policy initiative with nearly immediate effect (e.g., a reduction in the FICA tax withholding) , and assuming no "black swan" catastrophe, we foresee continued moderate- to low- growth in the range of 2%, +/- half a percent for the balance of this year. It's unlikely the 3% growth the president had hoped for -- a 50% increase in the acceleration of growth --is unlikely to be realized before this time next year; it's fatuous at this point.
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