Private sector employment growth remained strong in June

In June, US nonfarm payrolls increased by 372,000. While this result could be considered very strong in a long-term historical comparison, it is at the lower end of the recent uptrend (see first chart). The average monthly gain from 2010 to 2019 was 183,000, and the average monthly gain over the last twelve months was 524,000.

Private payrolls rose by 381,000 in June (see first chart). The average monthly increase from 2010 to 2019 was 181,000 and the average monthly increase over the past twelve months was 508,000. Total non-farm payrolls are 0.3% below February 2020 levels, while private sector payrolls finally surpassed the February 2020 peak (see second chart).

Growth in recent months has generally been broad-based. As part of a 381,000 private sector job growth, private services added 333,000 compared to a 12-month average of 436,000, and commodity industries added 48,000 compared to a 12-month average of 71,700.

In private services, education and health services increased by 96,000 (vs. 58,300 on average in twelve months), business and professional services added 74,000 (vs. 99,100), leisure and hospitality added 67,000 (vs. 134,300) , transport and warehousing added 35,500 jobs (versus 41,000 on average), information services 25,000 (versus 15,700), wholesale trade 16,400 (versus 16,600), and retail employment 15,400 (versus 32,900; see third graph).

Among the 48,000 gains in goods-producing industries, non-durables increased by 18,000, construction by 13,000, durable goods by 11,000, and mining and logging by 6,000 (see chart 3) .

While actual monthly private sector wage growth dominates several service industries, monthly percentage changes paint a slightly different picture. The mining and logging industries, information services, and transportation and warehousing have recently shown significant monthly percentage gains (see graph four).

Average hourly wages rose 0.3 percent in June, bringing a 12-month gain of 5.1 percent. Average hourly wages for production and non-supervisory workers rose 0.5% MoM and rose 6.4% year-over-year. The average workweek for all workers remained unchanged in June at 34.5 hours, while the average workweek for manufacturing and non-supervisory organizations remained at 34.0 hours.

Combining wage bills with hourly wages and hours worked, the total weekly wage index for all workers rose 0.6% in June and is 9.4% higher than a year ago; the index for production and non-supervisory workers rose by 0.8 percent and is 10.7 percent above the level of the previous year.

The total number of officially unemployed in June amounted to 5.912 million people, which is 38 thousand less. The unemployment rate was flat at 3.6 percent, while the underemployment rate, referred to as the U-6 rate, fell 0.4 percentage points to 6.7 percent in June. In February 2020, the unemployment rate was 3.5 percent and the underemployment rate was 7.0 percent.

The employment-to-population ratio, one of the roughly matching AIERs, was 59.9 percent in June, down 0.2 percentage points and still well below February 2020’s 61.2 percent. The labor force participation rate fell by 0.1 percentage points in June. , falling to 62.2 percent but still well below February 2020’s 63.4 percent (see chart five). The total workforce was 164.0 million, down 353,000 from the previous month and more than half a million below February 2020’s level of 164.6 million (see chart five).

The weaker participation rate is one of the reasons why the labor market remains so tight. According to the latest Jobs and Turnover Survey (JOLTS), there are 1,034 available workers for every job, up from April’s record low of 0.957 (see chart six). The JOLTS report did show that total private sector job openings and private sector layoffs declined as early as April and May, suggesting some easing in working conditions.

The June Employment Report shows that total non-farm and private sector jobs posted strong, albeit somewhat slower, growth. The somewhat slower growth is consistent with the upward trend in weekly initial jobless claims, as well as slightly fewer job openings and layoffs in May. Decreased confidence in the labor market could lead to a reduction in consumer spending. Persistently higher rates of price growth are also hurting consumer attitudes and may be starting to affect spending patterns. In addition, the intensifying cycle of Fed tightening increases the cost of borrowing for both consumers and businesses. At the same time, the consequences of the Russian invasion of Ukraine continue to disrupt global supply chains. The outlook remains highly uncertain, and caution is warranted.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 after over 25 years of economic and financial market research on Wall Street. Bob previously led the Global Equity Strategy division of Brown Brothers Harriman, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.

Prior to joining BBH, Bob was Senior Equity Strategist at State Street Global Markets, Senior Economic Strategist at Prudential Equity Group, and Senior Economist and Financial Markets Analyst at Citicorp Investment Services. Bob holds an MA in Economics from Fordham University and a BA in Business from Lehigh University.

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