by Bill McBride on 7/02/2015 09:55:00 AM
Thursday, July 02, 2015
Earlier: June Employment Report: 223,000 Jobs, 5.3% Unemployment Rate
This was a decent employment report with 223,000 jobs added, although April and May were revised down by a combined 60,000 jobs.
Unfortunately wage growth is still weak, from the BLS: "In June, average hourly earnings for all employees on private nonfarm payrolls were unchanged at $24.95. Over the year, average hourly earnings have risen by 2.0 percent." Weekly hours were unchanged for the fourth month in a row.
A few more numbers: Total employment increased 223,000 from May to June and is now 3.5 million above the previous peak. Total employment is up 12.2 million from the employment recession low.
Private payroll employment also increased 223,000 from May to June, and private employment is now 4.0 million above the previous peak. Private employment is up 12.8 million from the recession low.
In June, the year-over-year change was just over 2.9 million jobs.
Note: The unemployment rate falling to 5.3%, and still little real wage growth - and still a large number of people working part time for economic reasons - indicates slack in the labor market. My view, partially based on demographics, is that the unemployment rate can fall below 5% without a significant pickup in inflation.
Overall this was a decent report.
Employment-Population Ratio, 25 to 54 years old
Since the overall participation rate declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.
In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.
The 25 to 54 participation rate was declined in June to 80.8%, and the 25 to 54 employment population ratio was unchanged at 77.2%. As the recovery continues, I expect the participation rate for this group to increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s.
Average Hourly Earnings
This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.
The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees. Nominal wage growth increased 2.0% YoY - and although the series is noisy - it does appear wage growth is trending up a little. Wages will probably pick up a little more this year.
Note: CPI has been running under 2%, so there has been some real wage growth.
Part Time for Economic Reasons
From the BLS report:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 6.5 million, changed little in June. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.The number of persons working part time for economic reasons decreased in June to 6.51 million from 6.65 million in May. This is the lowest level since Sept 2008 and suggests slack still in the labor market.
These workers are included in the alternate measure of labor underutilization (U-6) that declined to 10.5% in June (lowest level since July 2008).
Unemployed over 26 Weeks
This graph shows the number of workers unemployed for 27 weeks or more.
According to the BLS, there are 2.121 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 2.502 million in May.
This is trending down - and is at the lowest level since September 2008 - but is still high.
State and Local Government
This graph shows total state and government payroll employment since January 2007. State and local governments had lost jobs for four straight years. (Note: Scale doesn't start at zero to better show the change.)
In June 2015, state and local governments added zero jobs. State and local government employment is now up 132,000 from the bottom, but still 626,000 below the peak.
State and local employment is now generally increasing - slowly. And Federal government layoffs appear to have ended (Federal payrolls were unchanged in June, and Federal employment is up 5,000 year-to-date).
Overall this was a decent employment report for June.