Wow, talk about exceeding expectations
Job growth was up much higher than pundits expected in June, as reported today by the government.
According to the Bureau of Labor Statistics, nonfarm payrolls increased by 372,000 over the month, way stronger than economists’ consensus estimate of 250,000.
The BLS’ U-6 unemployment rate that includes discouraged workers and those holding part-time jobs for economic reasons dropped to 6.7% from 7.1% (the underreported U-3 headline rate remained unchanged at 3.6%).
Civilian labor force participation was essentially flat, falling slightly to 62.2% from 62.3% but still remains more than a full percentage point below the level seen just before the pandemic started in 2020.
Total civilian employment – at 158.1 million – actually fell somewhat in June and was still close to 800,000 below its February 2020 level.
Average hourly earnings increased 0.3% for the month and were up 5.1% from a year ago, indicating that wage pressures remain strong as brisk inflation sails along.
Among the unemployed, both the number of permanent job losers (1.3 million) and the number of persons on temporary layoff (827,000) changed little over the month.
The number of long-term unemployed – i.e., those jobless for 27 weeks or more – was essentially unchanged at 1.3 million. This measure is 215,000 higher than in February 2020.
The long-term unemployed accounted for 22.6% of all unemployed persons in June.
Interestingly, 7.1% of employed Americans teleworked (worked mainly from home) because of the pandemic, down from 7.4%.
Another 2.1 million people reported that they’d been unable to work because their employer closed or they were laid off thanks to the pandemic – up from 1.8 million in May.
By sector, education and health services led the job added, with 96,000 hires, while professional and business services added 74,000 positions.
What do these numbers mean?
By Dave Allen for Discount Gold & Silver
Wow, talk about exceeding expectations
Job growth was up much higher than pundits expected in June, as reported today by the government.
According to the Bureau of Labor Statistics, nonfarm payrolls increased by 372,000 over the month, way stronger than economists’ consensus estimate of 250,000.
The BLS’ U-6 unemployment rate that includes discouraged workers and those holding part-time jobs for economic reasons dropped to 6.7% from 7.1% (the underreported U-3 headline rate remained unchanged at 3.6%).
Civilian labor force participation was essentially flat, falling slightly to 62.2% from 62.3% but still remains more than a full percentage point below the level seen just before the pandemic started in 2020.
Total civilian employment – at 158.1 million – actually fell somewhat in June and was still close to 800,000 below its February 2020 level.
Average hourly earnings increased 0.3% for the month and were up 5.1% from a year ago, indicating that wage pressures remain strong as brisk inflation sails along.
Among the unemployed, both the number of permanent job losers (1.3 million) and the number of persons on temporary layoff (827,000) changed little over the month.
The number of long-term unemployed – i.e., those jobless for 27 weeks or more – was essentially unchanged at 1.3 million. This measure is 215,000 higher than in February 2020.
The long-term unemployed accounted for 22.6% of all unemployed persons in June.
Interestingly, 7.1% of employed Americans teleworked (worked mainly from home) because of the pandemic, down from 7.4%.
Another 2.1 million people reported that they’d been unable to work because their employer closed or they were laid off thanks to the pandemic – up from 1.8 million in May.
By sector, education and health services led the job added, with 96,000 hires, while professional and business services added 74,000 positions.
What do these numbers mean?
Some are saying that, on the whole, the new report suggests that the foundation of the economy remains strong despite pockets of weakness.
Others believe that the numbers – especially the wage increases – likely keep the Federal Reserve on a path to hike its Feds Funds rate by another 0.75% at its next meeting at the end of the month.
And there are those who say that the robust job numbers will translate into higher 2ndquarter GDP growth than previously expected.
Perhaps they’re swayed by Okun’s Law, which suggests a 1% increase in GDP for every 2% increase in employment. Or not.
The fact is no one knows how fast the economy grew during the April through June period – or whether it grew at all – and we won’t until the government releases its GDP report on July 28th.
Over the longer term, payroll processor ADP has partnered with Stanford's Digital Economy Lab to create an employment report that provides the kind of data that economists and other numbers junkies crave.
Their first report will be out August. 31st. Stanford's Erik Brynjolfsson said, "There’s a whole lot of things we can do with our data that no one else can do."
Brynjolfsson says the new report will break down employment by worker demographics and among different regions.
Not sure how that differs from what the BLS currently provides, although he hints it could come out weekly as opposed to the monthly government release.
The statistical gold standard is still the set of surveys conducted by the BLS, which are laborious, time-consuming, and have an increasing level of errors in a time where fewer of us like filling out government surveys.
For many years, ADP (together with Moody’s Analytics) has issued a monthly jobs report, timed to come out the day before the government's official nonfarm payrolls report.
ADP’s methodology has been obscure and has been designed mostly to mirror the official number from BLS – which isn’t always accurate itself and almost always subject to one or more revisions.
Alas, it makes sense for ADP to replace it with a new series that has its own independent utility.
But as Felix Salmon points out, many have tried before to build economic statistics on top of private-sector data, “and few of them have met with much success.”
That's partly because the owners of the data don't like to make it freely available (with their shaky results, no wonder).
Brynjolfsson, however, promises that the ADP data will be easily accessible on FRED (the prolific St. Louis Fed website).
Until the 28th, the consensus of eternally optimistic (and largely self-serving) Wall Street economists remains hopeful of positive GDP growth – at +2.4%.
But beware the computer at the Atlanta Fed that’s predicting negative growth.
My own thought? We’ve been in the throws of a jobs recession for over two years.
Regardless of what the esteemed folks at the National Bureau of Economics may say, it's less a technical thing of whether the economy is expanding or contracting and more a referendum on whether things feel good or bad.
As a result, Americans weren't at all sold on the NBER's findings...
That helps explain why this period of high prices and declining inflation-adjusted wages feels to many of us just like a recession, despite robust monthly job gains.
What ultimately matters for public confidence in the economy is Americans' ability to get a job and pay the bills — not what the GDP numbers say or what a bunch of academics, politicians and government agencies tell us.
That alone should give Jerome Powell and his Fed colleagues cause to pause their march to tighten too fast and too much.