Job Growth +224,000 Tops Expectations, Wage Growth Disappoints

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Jobs growth beat expectations of 165,000 but wage growth underperformed, rising 0.2% vs an expected 0.3%.

Initial Reaction

Economists missed to the downside this month. The Econoday consensus was for a payroll expansion of 165,000 jobs. ADP forecast 102,000.

Job Revisions

The change in total nonfarm payroll employment for April was revised down from +224,000 to +216,000, and the change for May was revised down from +75,000 to +72,000. With these revisions, employment gains in April and May combined were 11,000 less than previously reported.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +224,000 – Establishment Survey
  • Employment: +247,000 – Household Survey
  • Unemployment: +87,000 – Household Survey
  • Involuntary Part-Time Work: -8,000 – Household Survey
  • Voluntary Part-Time Work: +158,000 – Household Survey
  • Baseline Unemployment Rate: +0.1 to 3.7% – Household Survey
  • U-6 unemployment: +0.1 to 7.2% – Household Survey
  • Civilian Non-institutional Population: +176,000
  • Civilian Labor Force: +335,000 – Household Survey
  • Not in Labor Force: -158,000 – Household Survey
  • Participation Rate: +0.0 to 62.9% – Household Survey

Employment Report Statement

Total nonfarm payroll employment increased by 224,000 in June, and the unemployment rate was little changed at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in professional and business services, in health care, and in transportation and warehousing.

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

Hours and Wages

Average weekly hours of all private employees was flat at 34.4 hours. Average weekly hours of all private service-providing employees was flat at 33.3 hours. Average weekly hours of manufacturers rose 0.1 hour to 40.7 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.06 to $27.90. That a 0.22% gain. but note that last month was revised lower by $0.02. Average hourly earnings of private service-providing employees rose $0.07 to $27.65, a gain of 0.25%. Average hourly earnings of manufacturers rose $0.07 to $27.65, a gain of 0.25%.

Average hourly earnings of Production and Supervisory Workers rose $0.04 to $23.43. That's a 0.17% gain. Average hourly earnings of private service-providing employees rose $0.04 to $23.16, a gain of 0.17%. Average hourly earnings of manufacturers rose $0.04 to $22.07 a gain of 0.18%

Year-Over-Year Wage Growth

  • All Private Nonfarm from $27.05 to $27.90, a gain of 3.1%
  • All production and supervisory from $22.67 to $23.43, a gain of 3.4%.

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 3.7%. 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 7.2%. 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

The past several jobs reports have had wild fluctuations.

Revisions add to the discrepancies.

This month the fluctuation was to the upside but growth over the past 5 months has been volatile.

Mike “Mish” Shedlock

Comments (20)
No. 1-7
thimk
thimk

is the july fed rate cut still "in the cards"? .

stillCJ
stillCJ

Editor

"kids moving back home because they cannot find a job." Maybe getting a degree in Gender Studies was not the best choice for employment? With a low unemployment number and low inflation, what's not to like?

hmk
hmk

Like the inflation stats they lie and I believe deliberately. Anyone that wants a job can get one full or part time. A simple part time job like a receptionist is hard to fill. Plenty of job applicants on indeed but try calling them and see what you get. A lot of people leeching off welfare are compelled to look for work but will refuse it if offered. There was an article in the Detroit News about how the building boom in downtown Detroit has slowed due to lack of skilled tradesman and on top of that much higher wages and thus costs. The other reason was that because construction costs are escalating rents for business are becoming to high as well as residential rents/purchase. Trumps gets me sick when he states like he did today he has an incompetent fed because they raised rates. What an ass, he also gets the media sycophants to parrot the same line, reminds me of the pied piper.

Maximus_Minimus
Maximus_Minimus

Clearly more stimulus is needed, until unemployment rate turns negative.

Tengen
Tengen

Why do people still take the BLS seriously? If unemployment were truly 3.7% wages would be rising significantly. They aren't, even though basic supply and demand dictates they should. They started fudging numbers back in the early 1980s to calm markets and the manipulation has ramped up since then. Who could have imagined that by the mid 2010s there would be more Americans outside the labor force than in it? We're not a nation of children and elderly people. Birth rates are down and life expectancy is falling.

I've worked in companies that fake job postings so that they can plead for more H1Bs. It's a common practice. I've seen dire need exist for more workers and the execs decide to employ these delaying tactics to pay the lowest possible wages. Managers hate it, but what can they do?

The BLS has enormous incentive to lie as they have the power to move markets each month. There is both political and economic pressure. They also frequently revise downward, far more quietly than the fanfare that greets the initial report. But hey, the government would never lie, right?