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June’s 223,000 U.S. Jobs Increase Hit the Bull’s-eye

Jul 03, 2015

June’s Employment Situation report from the Bureau of Labor Statistics (BLS) was almost exactly on target with expectations.

2015 07 02 US Labor

The consensus among analysts prior to the latest release was that there would be a net increase in jobs of 230,000. The ‘official’ number turned out to be 223,000.

Such a level seemed nearly assured by weekly initial jobless claims over the past month that have been in the 270,000 to 280,000 range. (Below 300,000 for weekly initial jobless claims usually corresponds with a month-to-month net jobs gain of 200,000-plus.) 

June’s unemployment rate, versus May, improved by 0.2 percentage points, falling from 5.5% to 5.3%. This won’t be greeted with as much enthusiasm as one might suppose, however, because the ‘participation rate’ retreated from 62.9% to 62.6%. Therefore, a portion of the lower jobless percent will be chalked up to fewer people looking for work.

One eye-catching statistic in the report, though, is the step back in the number of long-time unemployed (i.e., those left hanging for 27 weeks or more), an impressive -381,000 month to month.

The BLS also publishes a Job Openings and Labor Turnover (JOLTS) report each month. It includes a ‘quits’ statistic on the number of workers who leave their positions voluntarily, either because they have alternative employment already in their back pocket or they’re optimistic about easily finding other occupations.

For the latest reporting period, April 2015, the number of ‘quits’ (2.7 million) returned close to its pre-recession level, which says good things about America’s current jobs situation.

So yes, U.S. job prospects have improved dramatically. But is this translating into the kinds of higher paychecks that will fuel more consumer spending – i.e., a big plus for the economy – and/or ignite cost inflation – i.e., not necessarily such a great thing?

Table 1 shows that, while there were some variations within industry sub-sectors in June, the overall earnings gain, both hourly and weekly, for all employees in the private sector stayed at the prevailing ‘norm’ of +2.0%.

Construction was one of the sub-sectors with faster increases in both average hourly earnings (+2.5%) and average weekly earnings (also +2.5%).

Focusing on only production and non-supervisory employees, construction’s average hourly earnings increase was +2.4% year over year, compared with +1.9% for all sectors. The disparity was even greater for average weekly earnings, +2.9% versus +1.6%.

But construction played no role in June’s all-sectors jobs increase. The number of on-site workers remained flat at 6.38 million. Compared with last year, that was an increase of 260,000.

U.S. construction’s unemployment rate is now 6.3%, nearly 2.0 full percentage points below June of last year’s 8.2%.

Meanwhile, manufacturing employment in June was up modestly, by 4,000 jobs. Mining and logging jobs were down by 3,000. The year-over-year number of jobs in the mining sector has plunged by 50,000, much of it due to reduced domestic energy sector activity, as Saudi Arabia continues to pump out oil to maintain market share, even as the world price continues depressed.

The unemployment rate in America’s ‘mining, quarrying, and oil and gas extraction’ sector has ballooned to 8.9% from 2.5% in June of 2014.

Services-providing employment, at +222,000 in June, was virtually the entire source of the U.S. total jobs gain. Sub-sector leaders were: professional and business services, +64,000; education and health, +50,000; retail trade, +33,000; and leisure and hospitality, +22,000.

In the professional and business services category, net hiring by accounting and bookkeeping firms, at +8,500, stood out. Architectural and engineering services also added staff, +4,400.

Health care and social assistance payrolls continued to swell (+53,000), with the medical component (+40,000) accounting for nearly 80% of the jump.

Accommodation and food services jobs persevered on a strong upward path in June, +26,000.

Employment in financial activities has been quietly making a comeback, In June, the month-to-month pickup was +20,000, lowering the sector’s jobless rate to an all-industries leading 2.5%.

Even government, traditionally number one for low unemployment rates, has a higher present level, 3.3%. There was no public sector job creation in June (0.0). Bump-ups by local administrations (+3,000) were offset by state downsizings (-3,000), while the feds held the course (0.0).

U.S. total employment is now +2.1% year over year; construction is +4.2%; manufacturing, +1.3%; and services, +2.6%.

Since the headline numbers were pretty much as expected, the Federal Reserve won’t be quick to alter its interest rate thinking – a rate hike is coming, but maybe not much before the end of the year.

Besides, there are other matters, such the Greek debt default and China’s stock market meltdown, to occupy the Fed’s concern at this time.

Table 1: Earnings of All Employees on U.S. Private Non-farm Payrolls
Average Hourly      Average Weekly 
     
Jun 2014 Jun 2015 % Change     Jun 2014 Jun 2015 % Change
   
Total $24.46 $24.95 2.0%     $843.87 $860.78 2.0%
Goods producing $25.71 $26.07 1.4%     $1,043.83 $1,050.62 0.7%
     Mining & logging $30.97 $30.88 -0.3%     $1,390.55 $1,340.19 -3.6%
     Construction $26.70 $27.37 2.5%     $1,043.97 $1,070.17 2.5%
     Manufacturing $24.82 $25.08 1.0%     $1,017.62 $1,020.76 0.3%
          Durables $26.20 $26.46 1.0%     $1,089.92 $1,087.51 -0.2%
          Non-durables $22.39 $22.64 1.1%     $900.08 $905.60 0.6%
Services providing $24.16 $24.69 2.2%     $804.53 $824.65 2.5%
     Wholesale trade $28.03 $28.70 2.4%     $1,090.37 $1,113.56 2.1%
     Retail trade $17.01 $17.42 2.4%     $530.71 $546.99 3.1%
     Transportation & warehousing $22.89 $22.72 -0.7%     $878.98 $881.54 0.3%
     Utilities $35.41 $36.79 3.9%     $1,494.30 $1,548.86 3.7%
     Information services $34.00 $34.73 2.1%     $1,244.40 $1,264.17 1.6%
     Financial activities $30.76 $31.53 2.5%     $1,144.27 $1,188.68 3.9%
     Professional & business services $29.26 $29.99 2.5%     $1,059.21 $1,082.64 2.2%
     Education & health $24.68 $25.21 2.1%     $807.04 $826.89 2.5%
     Leisure & hospitality $13.90 $14.28 2.7%     $362.79 $374.14 3.1%
Data source: Table B-3, Employment Situation Report, Bureau of Labor Statistics.
Table: CMD.
Table 2: Earnings of Production and Non-supervisory Employees on U.S. Private Non-farm Payrolls
Average Hourly      Average Weekly 
     
Jun 2014 Jun 2015 % Change     Jun 2014 Jun 2015 % Change
   
Total $20.59 $20.99 1.9%     $693.88 $705.26 1.6%
Goods producing $21.57 $21.96 1.8%     $897.31 $906.95 1.1%
     Mining & logging $26.84 $26.43 -1.5%     $1,272.22 $1,194.64 -6.1%
     Construction $24.66 $25.26 2.4%     $979.00 $1,007.87 2.9%
     Manufacturing $19.55 $19.88 1.7%     $823.06 $830.98 1.0%
          Durables $20.65 $20.97 1.5%     $879.69 $882.84 0.4%
          Non-durables $17.71 $18.06 2.0%     $733.19 $745.88 1.7%
Services providing $20.37 $20.78 2.0%     $657.95 $673.27 2.3%
     Wholesale trade $23.19 $23.56 1.6%     $895.13 $909.42 1.6%
     Retail trade $14.40 $14.76 2.5%     $432.00 $442.80 2.5%
     Transportation & warehousing $20.54 $20.63 0.4%     $786.68 $796.32 1.2%
     Utilities $32.81 $33.83 3.1%     $1,387.86 $1,414.09 1.9%
     Information services $28.69 $28.83 0.5%     $1,029.97 $1,029.23 -0.1%
     Financial activities $24.66 $25.35 2.8%     $905.02 $937.95 3.6%
     Professional & business services $24.29 $24.71 1.7%     $859.87 $872.26 1.4%
     Education & health $21.61 $22.07 2.1%     $689.36 $708.45 2.8%
     Leisure & hospitality $12.06 $12.37 2.6%     $302.71 $309.25 2.2%
Data source: Table B-3, Employment Situation Report, Bureau of Labor Statistics.
Table: CMD.


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