Despite 213K Jobs Gain, Unemployment Up by 499K: Wage Growth Anemic Again

The labor force expanded by 601K sending the unemployment rate up to 4.0% from 3.8%. Wage Growth missed expectations.

Initial Reaction

Today’s establishment survey shows jobs rose by 213,000. Revisions were positive.

The unemployment rate rose from 3.8% to 4.0% as the labor force rose by 601,000. More people are starting to look for jobs but employment only rose by 102,000.

Nonfarm wage growth was +0.2% vs an Econoday consensus of +0.3%. The Phillips' curve is a joke, but it's still widely believed.

Job Revisions

The change in total nonfarm payroll employment for April was revised up from +159,000 to +175,000, and the change for May was revised up from +223,000 to +244,000. With these revisions, employment gains in April and May combined were 37,000 more than previously reported.

Let’s dive into the details in the BLS Employment Situation Summary, unofficially called the Jobs Report.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +213,000 – Establishment Survey
  • Employment: +102,000 – Household Survey
  • Unemployment: +499,000 – Household Survey
  • Involuntary Part-Time Work: -205,000 – Household Survey
  • Voluntary Part-Time Work: -33,000 – Household Survey
  • Baseline Unemployment Rate: +0.2 to 4.0% – Household Survey
  • U-6 unemployment: +0.2 to 7.8% – Household Survey
  • Civilian Non-institutional Population: +188,000
  • Civilian Labor Force: +601,000 – Household Survey
  • Not in Labor Force: -413,000 – Household Survey
  • Participation Rate: +0.2 to 62.9– Household Survey

Employment Report Statement

Total nonfarm payroll employment increased by 213,000 in June, and the unemployment rate rose to 4.0 percent, the U.S. Bureau of Labor Statistics reported today. Job growth occurred in professional and business services, manufacturing, and health care, while retail trade lost jobs.

Unemployment Rate – Seasonally Adjusted

The above Unemployment Rate Chart is from the BLS. Click on the link for an interactive chart.

Nonfarm Employment Change from Previous Month by Job Type

Nonfarm Employment Change from Previous Month

Hours and Wages

Average weekly hours of all private employees were steady at 34.5 hours. Average weekly hours of all private service-providing employees rose 0.1 hour to 33.4 hours. Average weekly hours of manufacturers rose 0.1 hour to 40.9 hours.

Average Hourly Earnings of All Nonfarm Workers rose .05 to $26.98. That a 0.19% gain. Average hourly earnings of private service-providing employees rose $0.04 to $26.70, a gain of 0.15%. Average hourly earnings of manufacturers rose $0.06 to $27.00, a gain of 0.22%.

Average hourly earnings of Production and Supervisory Workers rose $0.04 to $22.62. That's a 0.18% gain. Average hourly earnings of private service-providing employees rose $0.04 to $22.35, a gain of 0.18%. Average hourly earnings of manufacturers rose $0.06 to $21.48, a gain of 0.28%.

Year-Over-Year Wage Growth

  • All Nonfarm: 2.7%
  • All production and supervisory: +2.7%

Wage inflation remains benign.

For a discussion of income distribution, please see What’s “Really” Behind Gross Inequalities In Income Distribution?

Birth Death Model

Starting January 2014, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I retain this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid. Should anything interesting arise in the Birth/Death numbers, I will comment further.

Table 15 BLS Alternative Measures of Unemployment

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said “better” approximation not to be confused with “good” approximation.

The official unemployment rate is 4.0%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 7.8%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Some of those dropping out of the labor force retired because they wanted to retire. The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job.

Strength is Relative

It’s important to put the jobs numbers into proper perspective.

  1. In the household survey, if you work as little as 1 hour a week, even selling trinkets on eBay, you are considered employed.
  2. In the household survey, if you work three part-time jobs, 12 hours each, the BLS considers you a full-time employee.
  3. In the payroll survey, three part-time jobs count as three jobs. The BLS attempts to factor this in, but they do not weed out duplicate Social Security numbers. The potential for double-counting jobs in the payroll survey is large.

Household Survey vs. Payroll Survey

The payroll survey (sometimes called the establishment survey) is the headline jobs number, generally released the first Friday of every month. It is based on employer reporting.

The household survey is a phone survey conducted by the BLS. It measures unemployment and many other factors.

If you work one hour, you are employed. If you don’t have a job and fail to look for one, you are not considered unemployed, rather, you drop out of the labor force.

Looking for jobs on Monster does not count as “looking for a job”. You need an actual interview or send out a resume.

These distortions artificially lower the unemployment rate, artificially boost full-time employment, and artificially increase the payroll jobs report every month.

Final Thoughts

Despite the alleged robust jobs picture, wage growth has been anemic. It is not keeping up with inflation, especially for those in school, those seeking to buy a home, and those who buy their own health insurance.

Mike “Mish” Shedlock

Comments
No. 1-11
clovisdad
clovisdad

Wage gains at a rate of 2.7% sound like the match the real rate of inflation, which, in a relatively stable system, seems expected. And the still relatively low participation rate suggests that nothing else will change for a while, until we bring the participation rate up. During that period the society will become wealthier without destructive inflation. Seems obvious.

WildBull
WildBull

Hi nic9075. 600000 people came from somewhere. Probably those catch and release folks. I agree with the cost of repairs and maintenance. Just my observation. People have more money to spend..

My economic indicator used to be traffic on 95 between Canton and Attleboro. About 3 yrs ago the trip South in the evening was routinely over an hour and getting worse. I've moved South since. Traffic and the mountain of snow in front of my house that didn't melt until mid June chased me out. Best thing I ever did.

nic9075
nic9075

There aren't many (if any) people left on the sidelines to "start looking". must be recently released prisoners that made up most of the 600,000 who "started looking".. Also "maintenance" doesn't cost "some money". It costs ALOT of money (think tens of thousands every year spent at home depot).. one of the reasons growing up in NYC I couldn't get this idea of home ownership -- everyone lives in apartments around here and 65% are renters

nic9075
nic9075

. It is not keeping up with inflation, especially for those in school, those seeking to buy a home, and those who buy their own health insurance.

Well it doesn't seem this way in the "real world"... I mean seems like everyone "in school' or these "fresh faced" recent grads (who are just thin skinned easily offended "millennial lites" all seem to have the LATEST iPhone, the latest MacBook pro, can afford gym memberships of $200 a month or more and are moving into all these new high rise 'rental apartment buildings' going up ALL OVER the greater Boston area --- near any MBTA or Commuter Rail "T" station there are rental buildings going up - the cheapest apartments (usually a 500 square foot studio) start at over $260hi0 a month.

So I cannot believe these articles about wage growth being "anemic".. I don't landlord accept credit cards either

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