Job Creation Tops June 2018 Consensus — 213,000 New Jobs Created, Unemployment Rate Rises to 4.0 Percent, Wages Tick Up 2.7 Percent

Jobs are everything.  Period.  Ongoing good news is that job growth continues to look up.

The U.S. added 213,000 net new jobs (preliminary) in June 2018.  The unemployment rate edged up from 3.8 percent in May to 4.0 percent as 204,000 added reentrants came back to the job market.  Reentrants are people that previously worked but were not in the labor force prior to commencing a search for a job.   There are now a total 2.1 million reentrants counted in the labor force.  A year ago (June 2017) the unemployment rate was 4.3 percent.

Year-to-date, the U.S. has added 1.287 million net new jobs compared to 1.101 million a year ago, an increase of 16.9 percent.

The net job gain in the prior 12 months totaled 2.374 million.

The U.S. continues the trend of having more jobs than any time in history, as shown in the following graph.  From the pre-recession peak in January 2008, total job loss was 8.7 million to the February 2010 trough.  Since then, the U.S. has created 19.2 million net new jobs.

Job gains for 2018 are not a simple equation from the prior year, but vary month-to-month on a year-over-year basis.  The next graph shows the net new job gains monthly since 2016.  Three of the prior six months posted greater job growth compared to a year ago and three were less.

Employment in the Leisure and Hospitality sector is a great proxy of the overall health index of the U.S. economy.  People do not spend money on vacations, cruises, entertainment, spas or dinners out unless they feel good about the future economy.  My premise is that the U.S. economic outlook is healthy as long as the employment growth rate in Leisure and Hospitality matches or exceeds that of the country overall.  Current Leisure and Hospitality job growth in the prior 12 months was 1.63 percent versus 1.62 percent for the total economy.  Given these data, again I see no recession on the horizon at this time foregoing unanticipated economic shocks.  This is declining for the second month in a row, however, signaling a potential start to eroding consumer confidence.

Average hourly earnings were up 5 cents in June versus May to $26.98.  Hourly pay has risen 72 cents in the past 12-months, a gain of 2.7 percent.   Hourly earnings monthly since 2007 are shown in the following graph.

Other items in the June 2018 jobs report:

  • Number of Persons Unemployed for Less Than 5 Weeks rose by 193,000 from a month, now at 2.227 million versus 2.301 million a year ago – a 3.2 percent decline.  The increase from May was directly attributable to the 204,000 reentrants to the labor force in June.
  • Long-Term Unemployed (jobless for 27 or more weeks), now at 1.478 million versus 1.715 million a year ago, was up 289,000 from May
  • Civilian Labor Force Participation Rateis now 62.9 percent, almost identical to the 62.8 percent a year ago
  • Unemployment The number of unemployed people dropped from 6.964 million in June 2017 to 6.564 million as of the end of June 2018
  • Unemployment Rates varied greatly with respect to educational attainment in June 2018

5.5 percent – Less Than High School Diploma or GED
4.2 percent – High School Diploma, No College
3.3 percent – Some College or Associate’s Degree
2.3 percent – Bachelor’s Degree or Higher

 

  • Employment-Population Ratiois now 60.4 percent versus 60.1 percent a year ago – the bigger the better
  • Number of Persons Employed Part Time for Economic Reasons(also known as involuntary part-time workers) are individuals desiring full-time employment but either had their hours cut back or cannot find a full-time job), declined by 210,000 from May and is down to 4.662 million compared  to 5.555  million a year ago
  • Marginally Attached to the Labor Force(not currently counted in the labor force, want and are available for work and had looked for a job in the prior 12 months) now at 1.437 million was at 1.582 million a year ago.  Within that group, 359,000 were classified as Discouraged Workers – persons not currently looking for work because they believe there are no jobs available for them.  Discouraged Workers fell by 155,000 in the past 12 months

To read the entire release from the Bureau of Labor Statistics click https://www.bls.gov/news.release/pdf/empsit.pdf

No doubt that the job growth rate on the upside is somewhat being buffered by a lack of available workers.   The expectation is for an increase in the hourly compensation rate given that the lack of skilled workers to fill available positions.

Many of the reasons that the job growth rate remains stuck in the 1.6 percent range is that anyone that has marketable skills either already has a job, lives in a locale without demand for their skill set, or really does not want to work.

Once again, this is a good jobs report.

Ted

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