A June Jobs Jump
Guest blog by Dr. Tom Cunningham, Economist and MST Advisory Services, Senior Advisor- Economics
The U.S. economy added 222,000 jobs in June, well above the expected level of around 170,000. Meanwhile, the popular indicators were mixed. The headline unemployment rate (U3) increased marginally to 4.4 percent. The broader measure of labor underutilization (U6, which includes all who want work and part-time workers who would like full-time employment) also ticked up slightly to 8.6 percent, while the labor force participation rate grew slightly, by a tenth of a percentage point.
June job gains were fairly widespread, but in the same industries that have been doing well recently. Healthcare, social assistance, finance, foodservice, business services, and mining all showed notable gains. Other sectors were either flat or marginally up. The average number of hours worked in a week was up a bit, and average hourly earnings increased by 2.5 percent on a year-over-year basis. While 2.5 percent is noteworthy, it is the high for this recovery, and with headline unemployment under 5 percent, we would expect more. Moreover, those income gains aren’t evenly distributed, and a lot of blue-collar workers, or employees without a college degree, have seen little or no income growth for a long time.
Overall, 2017 is shaping up, in broad terms, a lot like 2016, perhaps a bit stronger. This year’s first quarter was better than last year’s, though still unimpressive, and Q2 looks like it is following that same path. This job report supports the notion that, like last year, Q3 could turn out pretty good.
From another perspective, the report comes on the heels of a series of downward revisions in the GDP estimates, signaling fading hope for the so-called “Trump Bump.” GDP growth comes from adding workers, or making those workers more productive. We’re adding workers at a little more than a 1 percent annual rate, although it can vary widely from month to month. Productivity growth is also around 1 percent, though it too is volatile and hard to measure. So in total, GDP is growing at a little more than 2 percent, which is about what we expect for the foreseeable future. That said, it still looks like growth this year will be better than last year, if not by much. We’re in a “more of the same” mode.
About the Author
Tom Cunningham holds a Ph.D. in economics from Columbia University and was senior economist with the Federal Reserve Bank of Atlanta from 1985 to 2015. Mr. Cunningham serves as a consultant to MST in the creation and ongoing development of the MST Virtual Economist and is the MST Advisory economics specialist.
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