June Jobs: Good Numbers, Subject to Misinterpretation
Guest blog by Dr. Tom Cunningham, Economist and MST Advisory Services, Senior Advisor- Economics
This month’s national Employment Situation report from the Bureau of Labor Statistics (BLS) features a substantial increase in jobs, but the release is getting mixed reviews. The U.S. added 213,000 jobs, well above expectations of around 190,000 – and another 37,000 in revisions to the April and May counts. Still, the headline unemployment rate ticked up from 3.8 to 4 percent.
The .02 percentage point increase in the U3 rate, the headline unemployment rate, was matched by a .02 percentage point increase to 7.8 percent in the U6 rate, which adds in individuals not formally included in the narrow definition of “unemployed” but available for full-time work. Both figures reflect an increase in labor force participation of the 0.2 percent. That figure had gone unchanged since February, and a growing labor force is a healthy sign, fundamentally positive, as the economy needs additional workers.
On the earnings front, average hourly wages rose 2.7 percent from a year ago, slightly below expectations, but consistent with recent history.
Job gains were led by professional and business services, followed by manufacturing, which added a substantial 30,000 jobs in June, mostly in durable goods. Strength was also seen in health care, construction, and mining. Retail was the only sector with a notable loss of jobs, 22,000, still not enough to offset last month’s gain of 25,000. Other sectors were essentially unchanged.
All in all, the June BLS figures make for a pretty good report, despite an easily misinterpreted rise in unemployment.
Aside from the employment situation, last week saw the implementation of retaliatory tariffs by China, Mexico, Canada and the European Union. The tariffs target agriculture and automobiles, but will hit a wide variety of exports. Commodity futures markets are already reflecting notably lower domestic prices for this year’s production. Soybeans, for example, are off about 20 percent from March. The decline in gross revenue for farmers squeezes their operating margins. If the tariffs remain in place, expect notable distress in locations where the newly tariffed products are a significant part of those local economies.
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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