Dissappointing Employment Numbers

Nonfarm payrolls fell 125,000 in June as temporary Census workers declined 225,000. Private payrolls increased 83,000 in June and have risen by an average of 119,000 per month over the last three months.

The unemployment rate fell to 9.5% in June from 9.7% in May as labor force participation declined to 64.7% from 65.0%. Household employment dropped 301,000 in June.

The private workweek contracted by 0.1 hour to 34.1 hours in June and total private hours worked fell 0.2%. Manufacturing hours worked dropped a sharp 1.2% in the month.

BOTTOM LINE

Although private sector employment continued to expand (and at a faster rate than May), there are more negatives than positives in the June jobs report. Hours worked, which we have championed as the best measure of labor input, fell 0.2% (though for the quarter as a whole, grew at a robust annualized pace of 3.3%), while the drop in the unemployment rate was due to a decline in labor force participation not stronger job growth. In addition, the drop in average hourly earnings along with hours worked, points to a decline in June in wage and salary income of around 0.3% (this had been growing fairly rapidly). However, with private payrolls still growing and recognizing volatility from month to month, we do not view this report as pointing to a double dip in the economy, but it does suggest a downshift in the pace of growth.

Employment Trends

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