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Thursday, July 01, 2021

June Employment Preview

by Calculated Risk on 7/01/2021 04:58:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for June. The consensus is for 675 thousand jobs added, and for the unemployment rate to decrease to 5.6%.

Employment Recessions, Scariest Job Chart• First, currently there are still about 7.6 million fewer jobs than in February 2020 (before the pandemic).

This graph shows the job losses from the start of the employment recession, in percentage terms.

The current employment recession was by far the worst recession since WWII in percentage terms, but is now better than the worst of the "Great Recession".

ADP Report: The ADP employment report showed a gain of 692,000 private sector jobs, above the consensus estimate of 600,000 jobs added.  The ADP report hasn't been very useful in predicting the BLS report, but this suggests the BLS report could be above expectations.

ISM Surveys: Note that the ISM services are diffusion indexes based on the number of firms hiring (not the number of hires).  The ISM® manufacturing employment index decreased in June to 49.9%, down from last month.   This would suggest approximately 20,000 manufacturing jobs lost in June. ADP showed 19,000 manufacturing jobs added.

The ISM Services employment index for June has not been released yet.

Unemployment Claims: The weekly claims report showed a small decline in the number of initial unemployment claims during the reference week (include the 12th of the month) from 444,000 in May to 418,000 in June. This would usually suggest some pickup in hiring, although this might not be very useful right now. In general, weekly claims have been close to expectations in June.

Year-over-year change employmentPermanent Job Losers: Something to watch in the employment report will be "Permanent job losers". While there has been a strong bounce back in total employment, from the shutdown in March and April 2020, permanent job losers had been flat over the last several months.

This graph shows permanent job losers as a percent of the pre-recession peak in employment through the May report.

This data is only available back to 1994, so there is only data for three recessions. In May, the number of permanent job losers decreased to 3.234 million from 3.529 million in April.

Conclusion: The data is a little mixed this month.

As far as the pandemic, the number of daily cases during the reference week in June was around 15,000, down sharply from around 35,000 in May.   And vaccinations continue to increase.  These are strong positives for the job market.

So my guess is the report will be above the consensus.