June Jobs: An Employment Report Only a Central Banker Could Love

The June jobs report was strong enough that the Bernanke Fed will likely decide to begin scaling back bond purchases at its September policymaking meeting. At least that seems to be the emerging Wall Street consensus. Example: “After today’s report we are moving to a call for a first reduction in asset purchases at the September FOMC meeting” is how JP Morgan economists put it in a research note titled “Wake up and smell the taper.”  And here is Reuters’ chipper take on the data:

Job growth was stronger than expected in June and the employment count for the prior two months was revised higher, showing the economy on solid ground and likely keeping the Federal Reserve on track to scale back its massive monetary stimulus later this year.

Employers added 195,000 new jobs to their payrolls last month, the Labor Department said on Friday, while the unemployment rate held steady at 7.6 percent as more people entered the workforce. The government revised it count for April and May to show 70,000 more jobs created than previously reported.

But there is plenty more to this story, as folks on Main Street surely know:

1. The economy lost 240,000 full-time workers last month, according to the more volatile household survey, while gaining 360,000 part-time workers. In other words, the entire increase in the household measure of employment was accounted for by persons working part-time for economic reasons. The underemployment rate surged to 14.3% from 13.8%.

2. Does Obamacare explain the poor jobs mix? From the econ team at First Trust:

Given the volatility in these data series, we would not put too much emphasis on one month’s worth of data. However, it’s consistent with the large payroll gains for retail as well as restaurants & bars and probably shows some firms who would be hiring full-timers are hiring part-timers to avoid Obamacare.

3. Part-time America: There are 28 million part-time workers in US vs. 25 million before the Great Recession. There are 116 million full-time workers in US vs. 122 million before the Great Recession. In other words, 19% of the (smaller) US workforce is part time vs. 17% before the Great Recession

4. Some context: Even at 195,000 jobs a month, the US would not, according to Brookings, return to pre-Great Recession employment levels until 2021. The “jobs gap” remains huge.

5. If the labor force participation rate were back to prerecession levels, the unemployment rate would be 11.1%. And even accounting for America’s aging, the U-3 rate would be roughly 9.1%, according to Goldman Sachs.

Oh, there are some positives. Private-sector jobs were up 202,000. Since the sequester took effect, total nonfarm jobs are up an average of 183,000 per month versus 132,000 for same four months a year ago. (The Fed’s QE has been offsetting the sequester, basically.) The labor force participation rate, while still low, has risen two months in a row. Low inflation means hour earnings are rising.

Fine.

While the labor market may be improving enough for the Fed, for American workers the Long Recession continues.

A good point from economist Dean Baker:

Job growth was again heavily concentrated, with restaurants (51,700), retail trade (37,100) and employment services (18,600) accounting for more than half of the job growth in June. Total job growth in these sectors has averaged 105,000 over the last three months. These are all low-paying sectors to which workers turn when better-paying jobs are not available.

  1. J Climacus

    Given that the stock market tanked when Bernanke recently hinted that someday, in some way, QE might possibly be scaled back a bit, and it only recovered when he more or less walked that back, the chances the Fed will actually ease up on QE in September are near zero; probably near zero that it will even talk about it given what happened this last time. The Fed has us riding the paper money tiger and there will be no pleasant way off…

  2. Fastflyer

    Recognize a bubble when you see it folks. What can’t go on forever, won’t.

  3. MBF

    So you diagnose the problems as regulatory/fiscal in nature, and your solution is more money printing. I just don’t get it.

  4. Chris Campion

    Agreed.  I just can’t circle this square.  If more of the same is netting us more of the same, and has been for years, it might be time to rethink the whole premise.

    Mark Belling Fan: So you diagnose the problems as regulatory/fiscal in nature, and your solution is more money printing. I just don’t get it. · 13 hours ago

    I think we can stop with the “inflation remains low” line, too.  Inflation does not remain low if you’re purchasing items outside of the CPI market basket – in other words, if you’re living in the real world.  

    I haven’t looked at the national BLS.gov numbers, just the numbers for Vermont, over the past few years.  Job growth has been in the public sector, not private.  A significant chunk of the new jobs has been in the service industry.  These are 2nd jobs or jobs people take when 99 weeks of unemployment runs out.

    QE makes more capital available at lower rates.  It does not create one single job, other than guy who’s job it is to press the “Easing” button deep in the bowels of the Fed.

  5. Michael Hornback

    Isn’t it true that when the economy begins to pick up, employers start hiring part-time employees that eventually turn to full-time as the growing economy begins to mature? It seems this is how previous cycles have gone… and invariably the president in power gets blamed for the “McJobs” (remember the New York Times stories on this back in the 90′s? For a time, it gave Bob Dole hope!) but eventually these critiques go away as the economy rebounds. Am I missing something? I’m no fan of the current administration. However, I am interested in the truth and not just what benefits “my side.” So, I’m curious what experts in the field might say, for which you are one. :)

  6. Chris Campion

    It’s hard to quantify the reasons behind why the number of part-time jobs rise or fall, because the reasons why the jobs are available and why someone would take one, where, and when, are too dissolute to stick a tack in one and say “That’s it”.

    But when major companies talk about hiring part-time, temporary worker agencies show an increase in hiring, etc., you might be able to point a reasoned finger at BarryCare and call it a day.  My previous employer (a multi-national corporation) stated, over a year ago, that ObamaCare would cause reduced hiring, and that the penalty for not participating in ObamaCare would be the primary driver as to whether or not they offered health insurance anymore.

    So, in other words, costs are a primary concern in hiring, in terms of how much margin is impacted every time you hire – so if your costs are going up in healthcare, and you don’t know exactly how much or when, and you still need live bodies – then it’s Temp Time ™.  

  7. Chris Campion

    Also, net new job growth should be looked at in terms of growth between the private and public sector, if you’re trying to get an idea as to how well businesses are doing.  In VT, a 10-year look at the job growth numbers showed 0% net new job growth.  The sector that had the largest job growth was the public sector, not the private, so it means that even to scratch back to a 0% growth rate, the biggest job growth was occurring in the sector that takes taxes from earnings, not provides them.

    In other words, waving around job numbers doesn’t mean anything until you look at the supporting data.  Vermont’s governor, Peter Shumlin, is pretty good at touting low unemployment numbers for Vermont, but the reason it’s low is because people drop out of the workforce, people take service jobs (that’s the “growth” sector in the private sector), and because the state has a significantly disproportionately lower number of people in the workforce to begin with (something like 60% to the nat’l avg of 50%).  You’d actually have to work hard to wreck the unemployment number, given the current state.

  8. Chris Campion

    As James notes, full-time jobs FELL by 240,000.  U6 unemployment rate is up, at its highest rate since February.  So walk right past any talk of how this jobs number shows that the economy is doing better.  It is not.

    http://confoundedinterest.wordpress.com/2013/07/05/the-big-lebowski-recovery-jobs-up-195k-but-full-time-jobs-down-240k-part-time-up-360k/