US economy added 209k jobs in June, unemployment down to 3.6 percent – analysis – Eurasia Review

The company survey in June revealed an increase of 209,000 jobs, which was roughly in line with expectations. The unemployment rate fell to 3.6 percent, up 0.2 percentage points from the half-century low reached in April. Public sector employment accounted for 60,000 of the gains in June, meaning the private sector added just 149,000.

In addition, the job counts for the last two months have been revised down by 110,000. As a result, overall job growth over the past three months has averaged 244,000 per month, with the private sector adding an average of 196,000.

Hourly jump in June, but weak in the second quarter

After falling in May, the aggregate hours index rose 0.4 percent in June. We are still only up 0.2 percent since January. This points to slower labor demand growth than wages data suggests. This would be consistent with the history of labor hoarding, where employers keep more workers on their payroll than they need because of the difficulty in finding new workers.

For the full quarter, total hours increased just 0.5 percent annually. With the number of self-employed falling this quarter, total hourly growth is likely to be negative. This should translate into strong productivity growth for the quarter, offsetting the decline reported in the first quarter.

Wage jump in June

Average hourly wages rose 12 cents in June, bringing the annual wage growth rate over the past three months to 4.7 percent. This is significantly faster than the pace that corresponds to the Fed’s 2.0 percent inflation target.

The pattern of faster wage growth for low earners has been less clear in recent months. The annual wage growth rate for manufacturing and non-senior workers was 4.4 percent over the past three months. For manufacturing and non-managerial workers in retail, the figure was just 3.0 percent, compared to 6.4 percent in leisure and hospitality.

The labor force participation rate of prime-aged women hits another record high

The overall labor force participation rate (LFPR) remained unchanged at 62.6 per cent, but for prime-age workers (aged 25 to 54) increased by 0.1 percentage point to 83.5 per cent, 0.4 percentage point above its pre-2019 peak Pandemic. The LFPR for prime-age women rose 0.2 percentage points to 77.8 percent, the highest level ever recorded. For men, the rate rose slightly by 0.1 percentage points to 89.2 percent. This is still 0.4 percentage points below the pre-pandemic peak.

Black unemployment rate rises to 6.0 percent

After rising 0.9 percentage point in May, the black unemployment rate rose another 0.4 percentage point to 6.0 percent in June. This is worrying for two reasons. First, the unemployment rate for black workers reported in April was 4.7 percent, the lowest on record. This indicated that black workers could reap real benefits from a strong labor market. That seems less the case today.

The other reason is that black workers have historically benefited disproportionately from strong labor markets and have been hit hardest by weak labor markets. This increase in the black unemployment rate can be taken as evidence of a weakening labor market.

The percentage of unemployment due to layoffs has increased slightly, but is still well below peak levels

The rate of unemployment due to voluntary redundancies rose to 13.2 percent from 12.6 percent in May. This is a measure of workers’ confidence in the job market, as it indicates their willingness to quit a job before a new job is available. The June number is consistent with a strong job market, but is well below the 15.8 percent peak seen last September and also below the more than 15.0 percent highs reached in both 2019 and 2000.

Involuntary part-time employment increases by 452,000

The number of people who said they worked part-time for economic reasons increased by 452,000. This was followed by two months of sharp declines, but the June reading is still 89k higher than the March reading. This probably points to a somewhat weaker labor market.

The government sector creates 60,000 new jobs in June

State and local employment lagged private sector employment in the recovery from the pandemic. This was probably partly because recent political developments have made many government agencies, such as teachers and librarians, more difficult, but also because bureaucratic processes have blocked government efforts to equalize wages offered in the private sector.

That seems less the case now, with state governments adding 27,000 and local governments 32,000 new workers in June. State government employment is now 1.4 percent below its pre-pandemic peak and local government employment is at 1.0 percent.

Construction and manufacturing are still creating new jobs

Historically, construction and manufacturing have been the cyclically sensitive sectors of the economy. However, these sectors are still creating jobs despite the Fed’s rate hikes. 23,000 jobs were created in the construction industry and as many as 10,800 in residential construction. 7,000 jobs were created in manufacturing, driven by an increase of 15,000 jobs in the durable sector. 8,000 jobs were lost in the production of consumer goods.

41,100 new jobs were created in the healthcare sector in June

Healthcare has added more than 40,000 jobs in each of the past three months. It was by far the leading sector for job growth in June. In contrast, restaurants actually shed 800 jobs this month, the first drop since December 2020. With the average hours of manufacturing and non-regulatory workers flat in the larger leisure and hospitality sector, it’s unclear if this is demand – or offer history is .

Nursing homes and childcare centers, both of which have struggled to recruit workers, each saw jobs rise by 6,200 and 3,400, respectively. Nursing home employment is now 11.1 percent below pre-pandemic levels, while day care employment fell 4.6 percent.

Another solid report with some concerns

Overall, the job report from June can be rated as very positive. The modest decline in the unemployment rate meant the May spike was not the start of a trend. Employment growth has slowed significantly and private sector growth has now reached a pace that can be considered sustainable.

Wage growth means that workers are now seeing real wage increases. On the other hand, however, the Fed is likely to see this as a basis for further rate hikes. The rise in the black unemployment rate over the past two months reverses one of the most positive aspects of the recovery so far, although at least some of the reported decline and subsequent rise were likely due to measurement errors.

This first appeared on Dean Baker’s blog, Beat the Press.