Very brief rundown since I’m on the road with spotty wireless.
Payrolls rose 195,000 last month, as employers hired more aggressively than expected. Both April and May’s payrolls were revised up by a cumulative 70,000, such that average monthly job growth for the second quarter of the year was a solid 196,000.
The unemployment rate was unchanged at 7.6%. Though the household survey from which the jobless rate is derived showed added jobs, it also found the more people entered the job market. In each of the last two months, the labor force participation rate ticked up a tenth, hinting at what may turn out to be an important reversal in that key labor market indicator as a stronger labor market draws more jobseekers back in. That would be a positive development, though it would also take more job creation to knock down the unemployment rate.
Long-term unemployment continued to tick down as well, though it remains highly elevated, as 36.7% of the jobless were without work for at least six months, compared to 41.7% a year ago.
Wage growth also accelerated, up 2.2% over the past year, well ahead of consumer inflation, which was most recently seen growing at 1.5%.
Almost all of the gains came from the service side of the economy—manufacturing, which lost 6,000 jobs in June has now posted small losses for three months running. Construction added 13,000 last month and only 7,000 in May, raising the question of why the turnaround in housing hasn’t led to more construction jobs (part of the explanation is sales from inventory as opposed to new building).
Other less positive indicators from the report include a spike in involuntary part-time work, leading to a large jump in the underemployment rate, which went from 13.8% in May to 14.3% in June. And the government continues to shed jobs, with the federal sector down 5,000 in June and 65,000 over the past year.
So, while there are still notable soft spots—manufacturing, government, people who can’t find the hours they want, too many long-term unemployed—this report, with its positive revisions, a whiff of increased labor force participation, and a bit of pop in wages suggests not just an improving job market, but one that’s improving a bit faster than we thought.
Can it be sustained? That 1.8% GDP growth figure from the first quarter is cause for concern in this regard—that’s a pretty weak level of demand to support continued monthly payroll numbers around 200K. The sequester is still lurking as well, clearly in the government numbers, and perhaps in some of the manufacturing slide too, as contractors that produce government goods face layoffs.
On the other hand, labor market strength is reinforcing as more jobs, hours, and wages feed into the macroeconomy in ways that beget more of the same.
I’m running out of “other hands.” I don’t want to be the skunk at the garden party—and I’ll once again brag that my forecast was pretty good (180K, above the 161K consensus) so I’m not that surprised by the strong June report—but I’m worried about sustainability in the face of slow growth and fiscal drag. We may soon fondly look back on 2013Q2.
You hear that, Bernanke and co.?? Hold your fire re the taper and any other unwinding ideas you’re harboring. The job market’s still got a long way to go and you’re the only policy friend it’s got around here.