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U.S. June non farm payrolls were higher at 213,000 than the expected 195,000, following May when NFP added 244,000 jobs. We are still digesting the effect trade wars will have on jobs. Fed rates have doubt after hourly earnings.


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The market expected the June employment report released this Friday to see nonfarm payrolls rise in line with longer-run trends in monthly employment growth at a consensus of 195,000 new jobs. Logic suggested a return to the mean after the volatility in the hiring data, with strong February hiring offset by weakness in March and April also disappointing. The wages data makes it more certain the FOMC plan to raise three times into 2019. Unemployment was higher on higher participation and the two month NFP revision was 37,000.

June U.S. Employment Report


NFP June 2018



Employment:

  • June non-farm payrolls +213K vs +195K expected, Prior 223K (revised to 244K)
  • Unemployment rate 4.0% vs +3.9% expected
  • Participation rate 62.9% vs 62.7% prior
  • Underemployment rate 7.6% vs 7.8% prior
  • Two month net revision +37K
  • Private payrolls 202K vs 190K expected Prior 218K (revised higehr to 239k)

Wages:

  • Average hourly earnings +2.7% y/y vs 2.8% exp, Prior  2.7% y/y
  • Average hourly earnings +0.2% m/m vs +0.3% m/m exp
  • Hours worked 34.5 vs 34.5 expected Prior hours worked 34.5 

Household Survey Data

The unemployment rate rose by 0.2 percentage point to 4.0 percent in June, and the number of unemployed persons increased by 499,000 to 6.6 million. A year earlier, the jobless rate was 4.3 percent, and the number of unemployed persons was 7.0 million. 

Among the major worker groups, the unemployment rates for adult men (3.7 percent), adult women (3.7 percent), and Asians (3.2 percent) increased in June.

The jobless rate for teenagers (12.6 percent), Whites (3.5 percent), Blacks (6.5 percent), and Hispanics (4.6 percent) showed little or no change over the month.

Among the unemployed, the number of job losers and persons who completed temporary jobs increased by 211,000 in June to 3.1 million, and the number of reentrants to the labor force rose by -2- 204,000 to 2.1 million. (Reentrants are persons who previously worked but were not in the labor force prior to beginning their job search.)

The number of long-term unemployed (those jobless for 27 weeks or more) increased by 289,000 in June to 1.5 million. These individuals accounted for 23.0 percent of the unemployed.

In June, the civilian labor force grew by 601,000. The labor force participation rate edged up by 0.2 percentage point over the month to 62.9 percent but has shown no clear trend thus far this year.

The employment-population ratio, at 60.4 percent, was unchanged in June and has essentially been flat since February.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in June at 4.7 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

In June, 1.4 million persons were marginally attached to the labor force, little different from a year earlier. (Data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 359,000 discouraged workers in June, down by 155,000 from a year earlier. (Data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.1 million persons marginally attached to the labor force in June had not searched for work for reasons such as school attendance or family responsibilities. 

NFP June 2018 industry

Establishment Survey Data

Total nonfarm payroll employment increased by 213,000 in June and has grown by 2.4 million over the last 12 months. Over the month, job gains occurred in professional and business services, manufacturing, and health care, while employment in retail trade declined. (See table above.)

  • Employment in professional and business services increased by 50,000 in June and has risen by 521,000 over the year.
  • Manufacturing added 36,000 jobs in June. Durable goods manufacturing accounted for nearly all of the increase, including job gains in fabricated metal products (+7,000), computer and electronic products (+5,000), and primary metals (+3,000).
  • Motor vehicles and parts also added jobs over the month (+12,000), after declining by 8,000 in May. Over the past year, manufacturing has added 285,000 jobs.
  • Employment in health care rose by 25,000 in June and has increased by 309,000 over the year. Hospitals added 11,000 jobs over the month, and employment in ambulatory health care services continued to trend up (+14,000).
  • Construction employment continued to trend up in June (+13,000) and has increased by 282,000 over the year.
  • Mining employment continued on an upward trend in June (+5,000). The industry has added 95,000 jobs since a recent low point in October 2016, almost entirely in support activities for mining.
  • In June, retail trade lost 22,000 jobs, largely offsetting a gain in May (+25,000).

Employment showed little or no change over the month in other major industries, including wholesale trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in June. In manufacturing, the workweek edged up by 0.1 hour to 40.9 hours, and overtime edged up by 0.1 hour to 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours. 

In June, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.98. Over the year, average hourly earnings have increased by 72 cents, or 2.7 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $22.62 in June. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for April was revised up from +159,000 to +175,000, and the change for May was revised up from +223,000 to +244,000. With these revisions, employment gains in April and May combined were 37,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 211,000 per month over the last 3 months.

  • The Employment Situation for July is scheduled to be released on Friday, August 3, 2018, at 8:30 a.m. (EDT).

Since January's employment report  the economy comfortably added jobs that absorbed new labor market entrants and the unemployment rate remained at 3.9%. Inflation on a 12-month basis continued to run below the FOMC's target of 2% with January's core CPI reading indicated some firming of trend inflation towards the Committee's objective. Since then gorowth and inflation have struggled.

Source: AFP, TradersCommunity Data, BLS

From The TraderCommunity Research Desk

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