June Jobs Report: Upside Surprise

July 5th, 2013 at 9:35 am

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.

Print Friendly, PDF & Email

5 comments in reply to "June Jobs Report: Upside Surprise"

  1. Fred Donaldson says:

    Average wages are distorted by higher earners, but BLS chart shows median earnings for first quarter for all wage and salary earners virtually unchanged year to year. You need to look at the result of higher numbers of part-time and lower paid workers, and also consider the median earnings of all members of the workforce, employed and not, to see the impact of the job market on the economy and the individual and their family.

  2. Mark Jamison says:

    The Postal Service, responding to what is essentially an accounting fiction, has shed about 193,000 jobs since 2008 or about 3000 jobs per month. Many of the remaining positions have replaced full time workers with part timers with poor benefits. Is this any way to run a recovery?
    Over a little less than a decade postal head count is down over 300,000. Much of that is in response to a false crisis enflamed by a media that has duplicitously reported losses as the result of changing technology when, in fact, 80% of those losses result from a budget scoring issue created by PAEA (a significant portion of the rest are the result of arcane OWCP calculations).
    Across the economy we’ve been shedding public sector employment at rates that far exceed any “fat” in public sector budgets. This is very much part of the starve the beast austerity syndrome and is a big part of the explanation why gains in employment can’t get any real traction. Even if many of these cuts were justified, and they aren’t, the effect is to suppress demand by removing good middle class jobs that are broadly distributed throughout American communities.
    It doesn’t seem that many progressive economists are looking critically at the impacts of these public sector job losses. They are significant and should be the topic of more discussion and research.

    • jo6pac says:

      Thanks to both you above the happy talk isn’t getting Main Street back on course.

  3. save_the_rustbelt says:

    I’m on the road with really spotty wireless, but somewhere I saw a commentary indicating this growth was about “bartenders and waitresses.” Any truth to that?

    • Jared Bernstein says:

      It was mostly in services–ex gov’t–but pretty broad gains throughout that varied sector. A big pop in involuntary pt work, though, which may be related to the restaurants and bars.