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The June jobs report was released one day early because of the 4th of July holiday. And the headline numbers were excellent. 149,000 new jobs added. Well ahead of the 106,000 expected. Plus, the unemployment rate unexpectedly declined to 4.1% when it was expected to rise to 4.3%, far below the Fed's recently revised estimate of 4.5%. This is especially good news after yesterday's ADP employment number that indicated a LOSS of 33,000 jobs, along with whispers of stagflation. The only fly in the ointment is that such strong employment numbers might give the Fed another excuse to keep rates elevated.
That's the received wisdom of this morning's talking heads. But is it the whole story? And the answer is no.
Let's start with the details of the headline number. The details indicate that GOVERNMENT employment, specifically state and local education employment, makes up about 75,000 of those 147,000 jobs. State and local education hiring...in June? When schools are closing for summer? Yes, indeed. These are likely temporary summer jobs, staffing up all the summer school/day care/summer camp jobs that provide care for the children of families where both parents work. These jobs may well be gone in September. And the multiple jobholders detail from the household survey adds weight to this speculation, as the multiple jobholders jumped in June. Meanwhile, PRIVATE employment came in under expectations.
The household survey also looks good at first glance. Full-time employment is up almost 400,000, helping to offset last month's dreadful decline. How many of these jobs are the temporary summer jobs described above? We'll find out in September, I suppose. But the big issue is the labor force - that is, the number of people available for work. It declined. By a lot. Again. That's two months in a row where the labor force declined. All things being equal, a declining labor force yields a smaller unemployment rate. This decline in the labor force goes a long way toward explaining the unexpected drop in the unemployment rate. So, all may not be well on the employment front.
The worst of both worlds would be a Fed holding steady based on "data" that was, in truth, weaker than it seemed. One way or another, we are going to find out.
Discussion (15)
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I look forward to your reports, ekosj. Although they almost always show disappointing results, at least they provide some balance. I'm always perplexed at the declining work force. Given our aging population, can retirement explain those numbers at all?
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Why would this year's June hiring be any different from any other non-Covid June hiring pattern? How much shrinking workforce is likely accounted for by illegal aliens tiptoeing away before their number comes up?
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Thanks Susan. I was trained as an economist. They don't call it "the dismal science" for nothing.
Retirement? Perhaps. We could dig out the May and June numbers from the Social Security Trustees ... see if larger than usual numbers of folks showed up on the Soc Sec rolls. But even that isn't certain. Lots of folks take Soc Sec at 62 and keep working. They could have finally retired in May and June without a blip on the Soc Sec data.
But if it IS retirement then the declining work force may not be entirely a bad thing. If people felt that, with inflation low, they didn't really need to keep working. Maybe?
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I had the same question as Sisyphus.
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Could be. But I'm skeptical about the "1MM self-deporting illegals" I think it's much more likely that lots of those 1MM simply started telling the survey takers that they were native born. But certainly some could be heading home.
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