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.
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.