According to the June employment report, 372,000 jobs were created by the economy last month. The private sector added 381,000. The private sector now employs 140,000 more people than it did before the pandemic. The total number of jobs is still at 524,000. However, local government employment has fallen to 599,000 and state government employment is at 57,000 below prepandemic levels. For the fourth consecutive month, the unemployment rate was at 3.6 per cent.
Further, wage growth slows
The best news is that there is more evidence of a slowing in wage growth. The annualized rate was 4.3 per cent when comparing the last three month (April, May, June) to the previous three months (January February, March). This is a decrease from the annualized rate of 6.1%, which was compared to the winter (November December, January) and the fall (August September, October).
This is a huge deal because the Fed’s plans for aggressive rate hikes was based on a concern for a 1970s-type wage-price spiral. When wage growth slows, it is impossible to have wage-price spiral. As it is, the 4.3 percent annualized rate of wage growth is only a 0.9 percentage point higher than the 3.4 percent rate in 2019 when inflation was comfortably below the Fed’s 2.0 percent target.
Construction Adds Jobs, Manufacturing Employment Exceeds Pre-Pandemic Levels
Construction added 13,000 jobs in the month of June, with gains elsewhere compensating a slight decline in residential construction. Overall sector employment is now at 0.6 per cent above its pre-pandemic peak. Although lower housing starts will impact employment, this will be partially offset by an improvement in supply chain problems that will allow for more completions. Manufacturing added 29,000 jobs, pushing the sector’s employment slightly above its pre-pandemic level.
Air Transportation and Retail Jobs
In June, air transportation added 7,500 jobs. The sector now has 7.9 percent more employment than it did before the pandemic. Retail added 15,400 jobs, which puts the sector’s employment at 1.2 percent higher than the pre-pandemic peak.
Healthy, but More Normal Job Growth in Hotels and Restaurants
In June, hotels added 14,800 jobs, while restaurants added 40.800 jobs. These numbers are not surprising, but they are still within the range of what could be expected in a normal month of good job growth. These sectors were among those most affected by the pandemic.
The employment rate in hotels is still 18.0 percent lower than it was before the pandemic. Restaurant employment is 5.9 per cent lower. Hotels will likely not be able to recover their pre-pandemic employment levels due to a permanent decline of business travel. Restaurant sales are likely to be in the same boat, as they are already at or near pre-pandemic levels.
While there are more jobs in nursing homes and child care centers, the employment rate is still far below pre-pandemic levels
Both the childcare and nursing sectors have struggled to add jobs in the recovery, as they are both relatively low-paying and work in difficult conditions. In June, nursing homes and childcare added 10,600 and 5,400 jobs, respectively. This means that employment in these two sectors is at 14.4 and 9.6 percent respectively, below their pre-pandemic level.
Local Government adds 5,000 workers, but employment still down to 599,000 from pre-pandemic level
State and local governments have struggled to attract workers in the recovery, just like childcare centers or nursing homes. The unemployment rate in local government is still at 4.1 percent, compared to pre-pandemic levels. The drop in local government education is more than half. State government employment is down 57,000 or 1.1 percent compared to pre-pandemic levels.
U-6 Labor Market Slack Measure Hits Record Low
The unemployment rate remained at 3.6 percent in June. However, a sharp decline in the number of people who are willing to work part-time has lowered the U-6 measure for labor market slack down to 6.7 percent. This is the lowest level ever recorded.
Drop in Labor Force Participation Ratios
The overall labor force participation (LFPR) dropped by 0.1 percent to 62.2 per cent. The LFPR for men aged 25 to 54 dropped by 0.3 percentage points, while it fell 0.2 percent for women of prime age. The June LFPR was 0.8 percentagepoint lower than the pre-pandemic peak. For women, it was 0.5 percent lower.
Stable Workweek Length
In June, the average workweek remained at 34.5 hours. Production and nonsupervisory workers saw a 34.0 hour workweek, down from 34.3 in June. Employers that can’t find workers often increase workweeks. This is not a problem right now.
The Voluntary Quits increase the share of unemployment, but it is still below its peak
The percentage of unemployment due to voluntary quitting rose to 14.0%, which is still far below the peak of more than 15.0% in February this year and the peaks reached in 2000 and 2019. This is consistent in a strong but healthy labor market.
Another great report on jobs
The June report showed much higher job growth than expected. The report also showed that the labor market is still strong but looking more normal. We continue to see moderate wage growth, which should ease concerns about a 1970s wage spiral. The U-6 measure of labor market slack, which measures the unemployment rate, is at its lowest level in 50 years. The economy should continue on its current path for the second half 2022, as supply chain issues are mostly resolved and prices fall to more normal levels.
