The U.S. labor market continues its resilience in June with U.S. employers adding 209,000 workers in June, much lower however than the much stronger than expected ADP Employment Report for June (actual 497,000; consensus 245,000) released a day ahead of the BLS employment report. The ISM services employment index rose to 53.1 versus 49.2 prior. Expectations ranged between 110K and 288K nonfarm payroll jobs added, with a consensus estimate for 225K. May’s employment gain was revised down to 306,000 from 339,000. Nonfarm employment has grown by an average of 278K per month over the first 6 months of 2023, lower than the average of 399K per month in 2022.
The unemployment rate fell to 3.6% in June from 3.7% in May, indicating the labor market remains tight. Wages grew 4.4% in June from a year earlier. A fun fact, this was the first time the number came in lower than the analysts’ poor predictions in sixteen months. The previous forecasts had 15th consecutive reports that had beaten the economist consensus.
The resiliency of the labor market continues to raise the odds of further tightening from the Federal Reserve. Ahead of the report, after the ADP Report according to the CME FedWatch Tool:
- Probability of a second-rate hike in September jumped to 27.7% from 18.1% yesterday;
- Probability of a rate hike in November jumped to 46.7% from 35.9%.
June 2023 US Employment Report
June 2023 US Employment Report and Expectations
The jobless rate was 3.6% in June the Labor Department reported Friday. The unemployment rate is back up from the pandemic rate of 3.5%, which was a 50-year low. (This was bettered in Jan at 3.4%) The job market is still tight, with the national unemployment rate hovering near half-century lows.
Highlights
Employment
- Change In Nonfarm Payrolls June: +209K (exp +225K; prev 339K revised to +306K)
- Unemployment Rate June: 3.6% (exp 3.5%; prev 3.7%)
- Labour Force Participation Rate June: 62.6% (exp 62.6%; prev 62.6%)
- Prior two-month net revision June: -6K v +93K prior (prevR -149K)
The unemployment rate and number of unemployed persons prior to the coronavirus (COVID-19) pandemic was 3.5 percent and 5.7 million, respectively, in February 2020). The number of employed persons in The United States increased to 160,994,000 in June of 2023 from 160,721,000 in May of 2023.
- Change In Private Payrolls June: +149K (exp 200K; prev 283K)
- Change In Manufacturing Payrolls June: +7K (exp -5K; prev -2K)
- Household survey June: +273K vs -310K prior
- Underemployment Rate U6 June: 6.9% (Prev 6.7%)
- Birth-death adjustment June: +26K vs +231K prior
- Long-term unemployed June: mil vs (prev 1.1m, 1.2m pre-pandemic)
- The long-term unemployed decreased to 0.66 percent in June from 0.71 percent in May of 2023.
- The employment-population ratio June 60.30% vs (prev 60.3%, 61.2% before pandemic)
Earnings
- Average Hourly Earnings (M/M) June: +0.4% (exp 0.3%; prev 0.3%)
- Average Hourly Earnings (Y/Y) June: +4.4% (exp 4.2%; prev 4.3%)
- Average Weekly Hours All Employees June: 34.4 (est 34.4; prev 34.3
- Payrolls benchmark NSA revision for 2022 was in Jan 23
- Payroll benchmark SA 2022 was in Jan 23
Other Employment Reports for June
- ADP employment 497K vs 170K expected
- ISM services employment index rose to 53.1 versus 49.2 prior
- ISM manufacturing employment 48.1 vs 51.4 prior
- Philly employment -0.4 vs -8.6 prior
- Empire employment -3.6 vs -3.3 prior
- Initial jobless claims survey week 265K vs 259K expected
The market had expected the June report released Friday to show nonfarm payrolls rose 225k new jobs. June was impacted by higher interest rates and prices started to weigh on the economy. Private payroll company ADP reported that US private sector jobs grew by 497,000 (consensus 228,000).
A severe labor shortage had driven up annual wage increases above 5% every month of this year until the last quarter. By contrast, wage gains averaged 3.2% in the 12 months to February 2020. Wage growth rose last month with, average hourly earnings rose by +0.4% m/m vs +0.3% expected in June from a month earlier. They were up 4.4% from a year earlier.
Employers hired across industries. Companies in certain industries that are vulnerable to interest-rate increases, such as technology and real estate, have announced layoffs. Some firms have implemented hiring freezes.
Participation
Labor force participation rate moved up from 62.6% to 62.6% prior; rate for women moved up to highest since pandemic started. Participation is down from 63.4% in February 2020.
Market Reaction
- Dow -61.90 at 33860.27,
- Nasdaq +0.77 at 13680.19,
- S&P -4.39 at 4408.47
- The 2-yr note yield, at 5.01% before the data, plunged to 4.91% in the immediate aftermath but now sits at 5.00%.
- The 10-yr note yield, at 4.07% shortly before 8:30 a.m. ET, fell to 4.01% but now sits at 4.07% again.
Fed Funds
- A 25 basis points rate hike in July remains solidified, but the probability of a second-rate hike in September declined modestly to 22.8% from 27.5% yesterday and the probability of a rate hike in November now sits at 42.8% versus 49.1% yesterday.
The USD moved lower after the jobs report. US rates moved lower than their pre-release levels.
The report itself being good news for the economy is seen as mixed news for bond and stock markets, a relief however after yesterday’s blowout ADP number with thinking it will question any eventual pivot on rates by the Fed with its monetary policy. The big revisions down question the Fed raising unconditionally, given they are data dependent. The report says still higher for longer with respect to the target range for the fed funds rate, but there is a but.
Markets earlier in the quarter were overridden by the shutdown of Regional Banks since SVB Financial and Signature banks and the havoc that has caused. The big downward revisions in April showed an impact from the failure of Silicon Valley Bank and subsequent financial turmoil which didn’t show up in the preliminary March jobs data, which reflected hiring trends earlier in the month. Through the beginning of April, both loan demand and credit conditions deteriorated per Dallas Fed Banking Conditions Survey. Both have reversed lower and are near worst since pandemic erupted (note: both series limited and only back to 2017). via @LizAnnSonders·
WSJ Fed Watcher Nick Timiraos on the jobs report:
Where the Jobs Were:
Largest gains (prior month) occurring in:
- Government (60K), namely local government (32K);
- Health care (41K), mostly hospitals (15K), nursing and residential care facilities (12K);
- Social assistance (24K);
- Construction (23K);
- Professional and business services (21K);
- Leisure and hospitality (21K). Employment in leisure and hospitality remains below its February 2020 level by 369K.
Largest losses occurring in:
- Retail trade (-11K)
- Transportation and warehousing (-7K)
- Changed little for mining, quarrying, and oil and gas extraction; and manufacturing.
Household Survey Data
Both the unemployment rate, at 3.6 percent, and the number of unemployed persons, at 6.0 million,
changed little in June. The unemployment rate has ranged from 3.4 percent to 3.7 percent since March
2022
Among the major worker groups, the unemployment rate for Whites declined to 3.1 percent in June.
The jobless rates for adult men (3.4 percent), adult women (3.1 percent), teenagers (11.0 percent),
Blacks (6.0 percent), Asians (3.2 percent), and Hispanics (4.3 percent) showed little change over the
month.
The number of long-term unemployed (those jobless for 27 weeks or more), at 1.1 million, changed little in June and accounted for 18.5 percent of the total unemployed.
In June, the labor force participation rate was 62.6 percent for the fourth consecutive month, and the
employment-population ratio, at 60.3 percent, was unchanged over the month.
The number of persons employed part time for economic reasons increased by 452,000 to 4.2 million
in June, partially reflecting an increase in the number of persons whose hours were cut due to slack work
or business conditions. Persons employed part time for economic reasons are individuals who would
have preferred full-time employment but were working part time because their hours had been reduced
or they were unable to find full-time jobs
The number of persons not in the labor force who currently want a job was 5.4 million in June, little changed from the prior month. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.
Among those not in the labor force who wanted a job, the number of persons marginally attached to
the labor force was little changed at 1.4 million in June. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4
weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, decreased by 112,000 to 310,000 in June.
Establishment Survey Data
Total nonfarm payroll employment increased by 209,000 in June, as employment in government,
health care, social assistance, and construction continued to trend up. Nonfarm employment has grown by an average of 278,000 per month over the first 6 months of 2023, lower than the average of 399,000 per month in 2022.
Private Jobs
- Health care added 41,000 jobs in June. Job growth occurred in hospitals (+15,000), nursing and
residential care facilities (+12,000), and home health care services (+9,000). Offices of dentists lost 7,000 jobs. Health care has added an average of 42,000 jobs per month thus far this year, similar to the average gain of 46,000 per month in 2022. - Social assistance added 24,000 jobs in June, mostly in individual and family services (+18,000). Job
growth in social assistance has averaged 22,000 per month thus far in 2023, in line with the average of 19,000 per month in 2022. - Employment in construction continued to trend up in June (+23,000). Employment in the industry has increased by an average of 15,000 per month thus far this year, compared with an average of 22,000 per month in 2022. In June, employment in residential specialty trade contractors continued to trend up (+10,000).
- Employment in professional and business services changed little in June (+21,000). Monthly job
growth in the industry has averaged 40,000 thus far in 2023, down from 62,000 per month in 2022.
Employment in professional, scientific, and technical services continued to trend up over the month
(+23,000). - In June, employment in leisure and hospitality was little changed (+21,000). This marks the third consecutive month of little employment change for this industry. Employment in the industry remains below its February 2020 level by 369,000, or 2.2 percent.
- Retail trade employment changed little in June (-11,000). Employment continued to decline in building material and garden equipment and supplies dealers (-10,000) and in furniture, home furnishings, electronics, and appliance retailers (-5,000). Motor vehicle and parts dealers added 6,000 jobs. Overall, employment in retail trade has shown little net change over the year.
- Employment in transportation and warehousing changed little in June (-7,000) and has shown no
clear trend in recent months. Over the month, employment edged down in couriers and messengers
(-7,000) and in warehousing and storage (-7,000), while air transportation added 3,000 jobs.
Government Jobs
Employment in government increased by 60,000 in June. Employment continued to trend up in state government (+27,000) and local government (+32,000). Overall, government has added an average of
63,000 jobs per month thus far in 2023, more than twice the average of 23,000 per month in 2022.
However, government employment is below its pre-pandemic February 2020 level by 161,000, or 0.7
percent
Manufacturing Jobs
US manufacturing payrolls increased by t,000 in June of 2023, following a 3,000 decline in May and beating forecasts of a flat reading.
Earnings
In June, average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents, or
0.4 percent, to $33.58. Over the past 12 months, average hourly earnings have increased by 4.4 percent.
In June, average hourly earnings of private-sector production and nonsupervisory employees rose by
11 cents, or 0.4 percent, to $28.83.
Wages Monthly
Wages Yearly
The average workweek for all employees on private nonfarm payrolls edged up by 0.1 hour to 34.4
hours in June. In manufacturing, the average workweek was unchanged at 40.1 hours, and overtime was
unchanged at 3.0 hours. The average workweek for production and nonsupervisory employees on
private nonfarm payrolls remained at 33.8 hours.
Hours
The change in total nonfarm payroll employment for April was revised down by 77,000, from +294,000
to +217,000, and the change for May was revised down by 33,000, from +339,000 to +306,000. With
these revisions, employment in April and May combined is 110,000 lower 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.)
The Employment Situation for July is scheduled to be released on Friday, August 4, 2023, at 8:30
a.m. (ET).
Source: AFP, Challenger, DOL, TradersCommunity Data, BLS
From The TradersCommunity News Desk