June jobs report: another strong late cycle reading
June jobs report: another strong late cycle reading
- +213,000 jobs added
- U3 unemployment rate up +0.2% from 3.8% to 4.0%
- U6 underemployment rate up +0.2% from 7.6% to 7.8%
Here are the headlines on wages and the broader measures of underemployment:
Wages and participation rates
- Not in Labor Force, but Want a Job Now: up +75,000 from 5.183 million to 5.258 million
- Part time for economic reasons: down -205,000 from 4.948 million to 4.743 million
- Employment/population ratio ages 25-54: up +0.1% from 79.2% to 79.3% (tied for expansion high)
- Average Weekly Earnings for Production and Nonsupervisory Personnel: rose $.04 from $22.58 to $22.62, up +2.7% YoY. (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
Trump specifically campaigned on bringing back manufacturing and mining jobs. Is he keeping this promise?
- Manufacturing jobs rose +36,000 for an average of +24,000/month in the past year vs. the last seven years of Obama’s presidency in which an average of 10,300 manufacturing jobs were added each month.
- Coal mining jobs rose +100 for an average of +100/month vs. the last seven years of Obama’s presidency in which an average of -300 jobs were lost each month
April was revised upward by 16,000. May was also revised upward by 21,000, for a net change of 37,000.
The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mainly positive.
- the average manufacturing workweek rose 0.1 hour from 40.8 hours to 40.9 hours. This is one of the 10 components of the LEI.
- construction jobs increased by 13,000. YoY construction jobs are up 282,000.
- temporary jobs increased by 9300.
- the number of people unemployed for 5 weeks or less increased by 193,000 from 2,034,000 to 2,227,000. The post-recession low was set one month ago.
Other important coincident indicators help us paint a more complete picture of the present:
- Overtime rose 0.1 hour from 3.5 hours to 3.6 hours.
- Professional and business employment (generally higher-paying jobs) increased by 50,000 and is up 521,000 YoY.
- the index of aggregate hours worked for non-managerial workers rose by 0.2%.
- the index of aggregate payrolls for non-managerial workers rose by 0.3%.
- the alternate jobs number contained in the more volatile household survey increased by 132,000 jobs. This represents an increase of 2,326,000 jobs YoY vs. 2,374,000 in the establishment survey.
- Government jobs increased by 11,000.
- the overall employment to population ratio for all ages 16 and up was unchanged at 60.4% m/m and is up 0.3% YoY.
- The labor force participation rate rose 0.2% from 62.7% m/m to 62.9% and is 0.1% YoY
This was another very good report, with the exception of wages. The majority of the leading components rose, as did employment in the most economically sensitive blue-collar industries.
The unemployment and underemployment rates rose, but that was only because participation in the labor force rose strongly.
There were only a couple of weak points. Although they remain very positive, the number of new, higher-paying professional and business jobs as been fading slightly over the past year. Involuntary part time employment, which fell significantly last year, has not made any progress since early this year. And of course, wages remain problematic. Nominal wage growth for non-managerial workers has been rising YoY, but so has inflation. In real terms, non-managerial wages are doing no better than treading water.
I continue to view the recent jobs reports as a run of good numbers that were telegraphed by strong short leading indicators late last year, but nevertheless consistent with a late cycle.
I’m going to take exception to your analysis. I see virtually no evidence that economic growth is any stronger now than it was under Obama. You have the Trump people telling everyone that things are improving so much, that people are actually starting to believe them even though the data does not support their claims.
The monthly employment gains and hours worked are less than they were under Obama. In 2017 and 2018 the monthly increase in payroll employment averaged 186,000 as compared to 204,000 from 2012 to 2016. Moreover, so far this year hours worked only rose an average of 0.15% versus 0.2% during the recovery phase of the cycle under Obama.
About the only area of improvement I see is industrial production and that is virtually all energy. Over the last year total industrial production rose 3.5%. But energy output was up 8.1% while non-energy output was only up 1.9%. OK, that is higher than the non-energy growth rate of 1.5% a year ago. But it is low compared to historic growth rates.
Real retail sales are up some 4.6%, about the same growth rate as over the last 7 or 8 years.
The other area of growth is government. Real government spending actually was negative most years under Obama.That was due largely to austerity imposed by the republican controlled Congress. They are now letting government spending grow.
Capital spending is up, but it is far short of what profits growth suggest it should be.
Interesting, coal employment is up, but coal output is down some 5% from its year ago level. Employment up and production down does not seem to be a sustainable trend.
I don’t see where NewDealdemocrat says that economic growth is generally better under Trump than Obama. In two specific, but narrow, areas, manufacturing and coal, the numbers are up. To me, saying we are in “late cycle” , implies less growth than mid cycle.