- by New Deal democrat
My Big Theme for the past few months has been that the AI Boom (or possibly bubble) is counterbalancing a stagnant or even shallowly recessionary rest of the economy. After three good reports in a row, the June employment report was very weak, and in some respects even negative.
Below is my in depth synopsis.
But first, because this report was release on a Thursday, let me note that initial jobless claims continued very low, unchanged at 215,000. The four week moving average declined -2,500 to 222,000. With the typical one week delay, continuing claims rose 2,000 to 1.814 million. More importantly, on a YoY basis, initial claims were down -6.9%, the four week average down -7.1%, and continuing claims down -7.2%. This series continues to be one of the two most positive short leading indicators for the economy, along with the stock market.
HEADLINES:
- 57,000 jobs gained, Private sector jobs increased 49,000, while government jobs added 8,000. The three month average rose declined to 111,000, about average for this year, and better than last year.
- The pattern of downward revisions to previous months completely resumed this month. April was revised lower by -31,000, and May was revised lower by -43,000, for a total decline of -74,000.
- The alternate, and more volatile measure in the household report, declined sharply, by -507,000 jobs. On a YoY basis, this series was negative for the fifth month in a row, now sharply down by -963,000 jobs, or over -80,000 per month
- The U3 unemployment rate declined -0.1% to 4.2%.
- The U6 underemployment rate declined -0.2% to 7.9%.
- Further out on the spectrum, those who are not in the labor force but want a job now declined -142,000 to 6.085 million, in the average range for the past 12 months..
Leading employment indicators of a slowdown or recession
These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn vs. rebounding. These were mixed.
- The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, was unchanged at 41.6 hours, tied for the highest number in 5 years, equalling its 2021 peak.
- Manufacturing jobs rose 3,000, only the 3rd increase in the last 12 months.
- Truck driving continued its decline, by -1,300.
- Construction jobs rose +11,000.
- But Residential construction jobs, which are even more leading, declined -2,900, taking out their interim low from last April, and setting a new 3 year low.
- Goods producing jobs as a whole rose +10,000.
- Temporary jobs, which declined by over -650,000 since late 2022, rose by 9,300, continuing to improve from their post-pandemic low set last October.
- The number of people unemployed for 5 weeks or less declined -28,000 to 2.182 million, about average for the past 12 months.
Wages of non-managerial workers
- Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.07, or +0.2%, to $32.38, for a YoY gain of +3.4%, the lowest in 5 years low. This is also substantially lower than the 4.2% YoY inflation rate as of May.
Aggregate hours and wages:
- The index of aggregate hours worked for non-managerial workers *declined* -0.4%, and is up 1.0% YoY, still a good comparison with the past 2 years.
- The index of aggregate payrolls for non-managerial workers also *declined* -0.1%, and is up 4.5% YoY, about average for the past 2 years, but only 0.3% above the YoY inflation rate through May.
Other significant data:
- Professional and business employment rose for the third month in a row, by +36,000. These tend to be well-paying jobs. This remains above its October low, and has finally turned higher YoY as well.
- The employment population ratio declined another -0.2% to 59.0%, vs. 61.1% in February 2020, and its lowest since October 2021.
- The Labor Force Participation Rate declilned -0.3% to 61.5% , vs. 63.4% in February 2020, and the lowest since February 2021. IMPORTANT: both the EPOP and LFPR are greatly affected by the retiring Boomer population. In the prime age 25-54 demographic, they are virtually unchanged.
SUMMARY
After three good monthly reports in a row, this was a big stumble, although it remained mainly positive, with the major exception of hours and payrolls.
The positives included the declines in the unemployment and underemployment rates, the headline employment number, plus increases in the leading manufacturing, construction, and general goods producing sectors. Temporary help jobs and professional and business jobs increased.
But there were important negatives as well, including the volatile monthly Household Survey employment number, as well as the leading sectors of residential construction and truck driving. But the most significant negatives were the YoY change in nonsupervisory hourly wages and the actual declines in both aggregate nonsupervisory hours and payrolls. The first two are almost certainly negative in real terms, once we find out what the June inflation number is, and the last one may have edged closer to flat YoY as well. This would mean that this very important short leading indicator will remain below its January peak for the 5th month in a row, which in the past has strongly suggested a recession is near.
