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US Employment Improves, Everything Else Stays the Same

Posted by Joseph Trevisani on Jul 2, 2015 11:07:00 AM

The American economy continued to produce jobs at a moderate rate, but the underlying fragility of the labor market was evident in every other statistic, from wages to hours worked, to the unemployment rate.

U.S firms hired a seasonally adjusted 223,000 new employees in June and the unemployment rate fell to 5.3 percent, the lowest in over seven years, reported the Labor Department in Washington.  Economists in the Bloomberg Survey had predicted 233,000 new workers and an unemployment rate of 5.4 percent.

Revisions to the two prior months reduced jobs totals by 60,000.  The new figures showed that companies had hired 254,000 workers in May not the initially listed 280,000 and 187,000 in April not 221,000. So far the economy has created 20 percent fewer jobs this year than last, averaging 208,000 per month against 260,000 in 2014.

Workers earned no more in June than May, average hourly earnings were unchanged at $24.95. May's gain in compensation was cut to 0.2 percent from 0.3 percent. The annual increase in wages unexpectedly fell to 2.0 percent in June from 2.3 percent in May. Analysts has predicted a 0.2 percent gain in monthly wages in June and a continuation of the 2.3 percent yearly increase. 

The average number of hours worked a week was flat at 34.5 in June as expected, exactly where it has been for the past three and a half years. 

Maybe the biggest disappointment in the lackluster report was the 0.2 percen5 drop in the unemployment rate to 5.3 percent.

The labor department counts an individual as unemployed only if they have actively looked for work in the prior thirty days.

According to today's report 432,000 Americans who presumably want to work, as they were searching for employment in May, stopped looking for a job in June and so  were no longer considered unemployed by the government.  

Mirroring that grim statistic, the labor force participation rate sank to 62.7 percent in June from 62.9 percent in May. This is lowest percentage of American working in over a generation, since 62.4 percent were employed in October 1977. Since then women have joined the work world in large numbers creating the modern labor economy. 

The number of American not in the labor force rose by 640,000 in June, the largest increase since April 2014,  to 93.6 million people out of a total U.S. population of 319 million. 

Employment measured in the household survey fell by 56,000 in June following a gain of 272,000 in May. These jobs have average 216,000 a month this year as opposed to 231,000 in 2014. 

The two headline numbers that form the jobs report, officially the Employment Situation Report from the Labor Department, non-farm payrolls and the unemployment rate, are based on information from two different government surveys.

The payroll figures are taken from a poll of firms on their hiring decisions over the month. It is also called the 'establishment survey'.  The unemployment rate is produced by a poll of households inquiring as to who is working or looking for work and is commonly called the ‘household survey’. 

Job growth in June was largely in the service sector as it has been for much of the recovery.  Retailers added 33,000 employees, the health-care sector added 40,000 and leisure and hospitality increased by 22,000.

Manufacturing jobs rose by just 4,000 a third less than the 6,000 forecast. Factory jobs have averaged 6,000 a month this year, less than half the 18,000 monthly average in 2014. Construction and government employment were unchanged in June.

A broader measure of unemployment called the u-6 or underemployment rate, which includes people who are working part-time but want fulltime work and who have searched for employment in the past year, fell to 10.5 percent in June from 10.8 percent in May. It was the lowest for this measure since July 2008.

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

nfp july 2

labor force july 2

 

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