June jobs report: excellent establishment survey, mediocre household survey

 - by New Deal democrat

HEADLINES: 

• +224,000 jobs added
• U3 unemployment rate rose 0.1% from 3.6% to 3.7%
• U6 underemployment rate rose 0.1% from 7.1% to 7.2% 

Leading employment indicators of a slowdown or recession

I am highlighting these because many leading indicators overall strongly suggest that an employment slowdown is coming. The following more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were all positive this month.

• the average manufacturing workweek rose 0.1 from 40.6 hours to 40.7 hours. This is one of the 10 components of the LEI. 
• Manufacturing jobs rose by 17,000. YoY manufacturing is up 167,000, a deceleration from last summer’s pace.
• construction jobs rose by 21,000. YoY construction jobs are up 204,000, also a deceleration from last summer. Residential construction jobs, which are even more leading, rose by 4600, the first monthly decline in the past three.

• temporary jobs rose by 4300.
• the number of people unemployed for 5 weeks or less declined by -186,000 from 2,147,000 to 1,961,000. The post-recession low was two months ago.

Wages and participation rates

Here are the headlines on wages and the broader measures of underemployment:

• Not in Labor Force, but Want a Job Now: rose by 227,000 from 5.045 million to 5.322 million
• Part time for economic reasons: declined by -8,000 from 4.355 million to 4.347 million
• Employment/population ratio ages 25-54: unchanged at 79.7%. This remains a declined from the peak at the beginning of this year.
• Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $.04 from  $23.39 to $23.43, up +3.3% YoY. This is still a slight decline from the recent YoY% change peak.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)  

Holding Trump accountable on manufacturing and mining jobs

 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?  

• Manufacturing jobs rose an average of +14,000/month in the past year vs. the last seven years of Obama's presidency in which an average of +10,300 manufacturing jobs were added each month.   
• Coal mining jobs were unchanged, an average of -100/month in the past year vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month

April was revised downward by -8,000. May was also revised downward by -3,000, for a net change of -11,000.

Other important coincident indicators help  us paint a more complete picture of the present:

• Overtime was unchanged at 3.4  hours.
• Professional and business employment (generally higher-paying jobs) rose by 51,000 and  is up +1,482,000 YoY. 
• the index of aggregate hours worked for non-managerial workers rose by 0.2%

•  the index of aggregate payrolls for non-managerial workers rose by 0.5%  

Other news included:            

• the  alternate jobs number contained  in the more volatile household survey rose by 247,000  jobs.  This represents an increase of 1,413,000 jobs YoY vs. 2,301,000 in the establishment survey. This survey, which has been negative three months this year, was a major disconnect from the establishment number. The household survey has a tendency to turn first, and this month it showed up in the establishment survey.
• Government jobs rose by 33,000.

• the overall employment to population ratio for all ages 16 and up was unchanged at 60.6% m/m and is up 0.2% YoY.          
• The labor force participation rate rose 0.1% from  62.8% to 62.9% m/m and is unchanged YoY.

SUMMARY

Once again there is a divergence between the establishment report, which was excellent, and the household report, which was mediocre.

The best news was that all of the leading measures in the report were positive, taking back last month’s declines. Good professional and business jobs and government jobs rose strongly. Aggregate hours and payrolls also rose nicely. The only negative in the establishment survey was that revisions continued to be negative, which is thought to be something that happens at negative turning points.

While the monthly increase in jobs in the household report was also strongly positive, the YoY change continues to be lackluster, averaging about 125,000 jobs a month. Again, this is thought to be the kind of divergence that happens at negative turning points. Both the unemployment and underemployment rates rose. The participation’s rates and employment to population ratios were either flat monthly or flat YoY.

So, bottom line, this was mainly a very good report. Whether it signals that recent weakness was overblown, or whether it itself was a countertrend number, we will find out in the next month or two.