Widget Image
Follow PPD Social Media
Friday, March 29, 2024
HomeNewsEconomyU.S. Economy Adds 195K Jobs in June, Unemployment Rate Remains at 7.6

U.S. Economy Adds 195K Jobs in June, Unemployment Rate Remains at 7.6

In this Wednesday, Oct. 24, 2012, photo, job seekers wait in line to see employers at a National Career Fairs’ job fair in New York. Unemployment rates declined in October in more than half of the 372 largest U.S. cities, further evidence of steady improvement in the job market. (AP Photo/Bebeto Matthews)

The Labor Department released the June jobs report, which reports that nonfarm payrolls jumped by 195,000 in June, coming in well above expectations of 165,000. The May job increase was also revised higher by 20,000 to 195,000. The unemployment rate held steady at 7.6%, compared to economists’ expectations that it would fall to 7.5%. The labor force participation rate rose in June to 63.5% from 63.4% in May. U.S. stock-index futures extended gains on the back of the report.

Report Headline

The June BLS jobs report reports that the U.S. economy added 195,000 jobs in June, which is ahead of forecasts and more than May’s figure, perhaps alleviating some concerns that the labor market is stuck in neutral and not contributing enough to the economic recovery.

The headline unemployment rate was unchanged at 7.6%. Economists had predicted an increase of 165,000 jobs and that the rate would drop to 7.5% from a month earlier. Employers added 175,000 jobs in May.

The significance of the monthly government jobs has risen in recent months as the Federal Reserve has increasingly tied its monetary policy to the health of the labor market.

The Fed has said that the trajectory of job creation will play a large role in determining when and how the central bank will begin scaling back its easy-money stimulus policies.

For weeks stock and bond markets have risen and fallen based on speculation by investors over when the central bank might start gradually reducing its $85 billion a month bond purchasing program known as quantitative easing.

Stock markets have soared to record highs this year primarily because investors have felt confident the Fed will maintain its stimulus programs indefinitely, or at least until the U.S. economy has proven it could stand on its own.

Supposedly, according to a statement read by Fed Chairman Ben Bernanke following the Fed’s June monthly meeting, labor markets will gradually strengthen, combining with other growing sectors of the economy to allow the Fed to start gradually scaling back its massive money print and bond purchase program, known as quantitive easing.

In the June report, the private sector was shown to have added 202,000 jobs, while government jobs fell by 7,000. One other encouraging development: the reports for both May and April were revised to show higher employment growth than first reported.

Treasury yields rose sharply on the data, with the 10-year Treasury now yielding 2.65%. Stock-index futures held their already-substantial gains from before the release of the jobs numbers — Dow futures are up 154 points.

If the Fed’s optimistic forecasts hold, Bernanke said bond purchases could start tapering off later this year and shut down by mid-2014, at which point the unemployment rate should have fallen to about 7%.

However, many analysts are skeptical of the Fed’s optimistic economic predictions. On June 28, the Institute for Supply Management-Chicago’s PMI gauge fell to 51.6 in June from 58.7 the month prior. Wall Street expected a shallower fall to 56. The reading suggests the Midwest manufacturing sector expanded at a slower rate in June from May. According to the BLS report, major industries, including mining and logging, construction, manufacturing, and transportation and warehousing, showed little change in June.

Lance Roberts, chief strategist at investment firm Streettalk Advisors, said he scanned data in an array of sectors ahead of Friday’s release of the June jobs report and all of it showed “weakness in hiring.”

In particular, Roberts said hiring in the manufacturing sector is “still very cautious.”

One factor holding back hiring, according to Roberts, is uncertainty tied to the implementation of the Affordable Care Act, the sweeping new health care legislation set to take effect on Jan. 1. Roberts said:

They (employers) really have no clue as to what the Affordable Care Act is going to do to their costs.

Earlier this week businesses with 50 or more employees got a reprieve from the Obama Administration when the White House announced it would delay for one year a requirement that employers of that size provide health care to their workers or face stiff penalties, further proof that the law’s implementation is not working as promised.

Other factors cited by economists as reasons for impacting hiring have been a payroll tax increase, the fiscal cliff increases indicted upon by Obama that took effect in January, and mandatory government budget cuts that kicked in March.

Roberts said the recent trajectory of U.S. labor markets provides little justification for the Fed to start moving away from its stimulus programs. He continued:

We’re not gaining that economic traction. There’s nothing to suggest the economy is about to take off and encourage hiring.

Most economists believe the economy needs to add at least 200,000 jobs each month to push the unemployment rate significantly lower.

Since the financial crisis of 2008 the Fed has initiated three rounds of bond buying programs and kept interest rates at historically low levels all in an attempt to spur economic growth. The Fed has vowed to keep the fed funds rate within a range of 0-0.25% until the unemployment rate falls to 6.5%.

Bottom Line

While the raw numbers are better than expected, the overall fundamentals that are required for a vibrant middle class are again absent from this report. Professional and business services – good paying jobs – added 53,000 in June, but leisure and hospitality – those who serve the good paying jobs – added 75,000 jobs in June, which is higher than the 55,000 in monthly job growth that this industry has averaged thus far in 2013. Taken together, that accounts for 128,000 jobs out of the 195,000 created, in total.

In other words, under a progressive president implementing progressive economic policy that professes a stated goal to grow the middle class, is killing it. In the modern “forward” looking American economy, either a citizen has the skills to obtain a job in the well-paying professional and business services sector, or they take an opportunity to serve those who are more fortunate to them.

Historically, this dynamic is always present in the American economy, but the difference is that the opportunity to find and work hard at a middle class position in typical middle class job sectors, such as manufacturing or construction, has dwindled away. The June BLS jobs report does not show any indicator that this concerning trend will reverse anytime soon.

Latest Numbers

Consumer Price Index (CPI):
+0.1% in May 2013

Unemployment Rate:
7.6% in Jun 2013

Payroll Employment:
+195,000(p) in Jun 2013

Average Hourly Earnings:
+$0.10(p) in Jun 2013

Producer Price Index (PPI):
+0.5%(p) in May 2013

Employment Cost Index (ECI):
+0.5% in 1st Qtr of 2013

Productivity:
+0.5%(r) in 1st Qtr of 2013

U.S. Import Price Index:
-0.6% in May 2013

U.S. Export Price Index:
-0.5% in May 2013

Written by

Rich, the People's Pundit, is the Data Journalism Editor at PPD and Director of the PPD Election Projection Model. He is also the Director of Big Data Poll, and author of "Our Virtuous Republic: The Forgotten Clause in the American Social Contract."

No comments

leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

People's Pundit Daily
You have %%pigeonMeterAvailable%% free %%pigeonCopyPage%% remaining this month. Get unlimited access and support reader-funded, independent data journalism.

Start a 14-day free trial now. Pay later!

Start Trial