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What to Expect From the June Jobs Report U.S. Added 287,000 Jobs in June; Unemployment Rate at 4.9%
(about 1 hour later)
At 8:30 a.m. Eastern time, the Labor Department will report the latest figures on hiring and unemployment in June. With the Republican and Democratic national conventions just weeks away, the government reported on Friday that employers added 287,000 workers in June, a vigorous rebound that helps sets the stage for the economic themes advanced by the presidential nominees.
After a disheartening jobs report in May that showed meager payroll growth of just 38,000, economists are watching the latest numbers to see if that low total was an uncharacteristic blip or a sign of a sustained slowdown in the labor market. The official unemployment rate rose to 4.9 percent, from 4.7 percent. And after three months of rising wages, average hourly earnings ticked up again.
Wall Street is looking for employers to add about 180,000 jobs — with the understanding that 35,000 of those represent the striking Verizon workers who were missing from the May count but have subsequently returned to their jobs. The unexpectedly grim initial employment report in May was disturbing enough to convince every voting member of the Federal Reserve’s policy-making committee last month to oppose any increase in its benchmark interest rate, as the official account of the meeting, released this week, revealed.
The official unemployment rate, which is based on a separate survey of households, is expected to tick up to 4.8 percent, from 4.7 percent in May. That jobs report, combined with Britain’s vote to leave the European Union, has fanned wider worries that the American economy is in danger of stalling.
This is what you should watch for: Concerns about the vitality of the recovery — which is in its seventh month — persist, but economists pointed to several encouraging signs, like manufacturing and consumer spending data.
This jobs report is the last one before the Republican and Democratic conventions take place later this month, so it will cue up the economic messages that both parties are looking to deliver. A strong number will undoubtedly be trumpeted by Hillary Clinton as evidence her party is best qualified to steer the economy, while a weak showing would be additional fodder for Donald J. Trump to argue it’s time for a change of party. Every monthly jobs report provides only a fleeting and incomplete picture, and a strike by more than 35,000 Verizon workers artificially held down May’s totals; they were back on the job in June and counted once again.
The monthly jobs gain, on average, in 2014 and 2015 reached nearly 240,000. In 2016, that average has fallen to 150,000. But with a jobless rate of 5 percent or less since last fall, some economists argue it is time to redefine what is considered a strong or weak report. More important, economists said that if the longer-term employment picture were significantly darkening, the stress would show up in other crucial areas. It is not. New claims for unemployment benefits have stayed at rock-bottom levels, consumer spending is strong, the manufacturing and service industry indexes have jumped, and the number of unfilled jobs, 5.8 million in April, is at record levels.
“There’s no question that job growth is significantly slower today than it was one or two years ago,” Andrew Chamberlain, chief economist at Glassdoor Economic Research, said. “But that is to be expected at this point in the economic cycle.” “During an economic downturn, the first place employers look to cut are unfilled jobs,” said Andrew Chamberlain, chief economist at Glassdoor Economic Research, adding that he had seen little evidence that hiring was being scaled back. “When I look through all the data, there is no smoking gun that the U.S. economy is pulling into a recession now.”
He and other analysts point out that payroll growth of 75,000 to 100,000 is sufficient to keep the unemployment rate from rising. The labor market is still improving, but at a slower pace than last year. Given that the jobless rate has consistently been at 5 percent or less since last fall, Mr. Chamberlain and other analysts argue it is time to lower the benchmarks for what is labeled a good or bad report.
The combination of the referendum in Britain to exit the European Union and the anemic hiring in the United States in May means there is pretty much no chance that the June report — no matter how positive — is going to nudge the Federal Reserve to change its stance and lift the benchmark interest rate when it meets later this month. That will, at least, give economists a brief reprieve from the continuous “will they or won’t they” suspense. “There’s no question that job growth is significantly slower today than it was one or two years ago,” he said, when the average monthly number routinely topped 200,000. “But that is to be expected at this point in the economic cycle.”
Some of the anxiety about the economy can be traced to stagnant wages. Finally, the needle has begun to move a bit. Taking account of the growing numbers of retiring baby boomers and the population growth, a monthly gain of 75,000 to 100,000 jobs is sufficient to keep the unemployment rate steady, while a 125,000 monthly gain is what is required to nudge it down further, said Dean Maki, chief economist at Point72 Asset Management.
Average hourly earnings rose 0.2 percent in May for a year-over-year gain of 2.5 percent, a long-awaited bump up in earnings that would ordinarily accompany a tighter labor market. Analysts are expecting a 0.2 percent rise for June. “I do think that whole framework will have to change over the next couple of years,” said Mr. Maki, who is also skeptical that the economy is in for a sustained slowdown.
But he acknowledged that the economy was in a transitional point, with job growth easing, which propels fears that it could quickly turn negative.
Many Americans, though, particularly those with fewer skills and less education who have yet to partake in the recovery’s rewards, have all the evidence they need that the economy is distressed.
Real median household income is less than it was a decade ago. And a broader measure of unemployment that includes discouraged job seekers and those who would prefer to work full time instead part time, has consistently hovered at around twice the official rate. The proportion of people employed or actively looking for work has also been dragging along at low levels, suggesting that more people would return to the work force if desirable jobs were available.
The deep-rooted discontent with the economy has been repeatedly voiced by the presumptive Republican nominee, Donald J. Trump, who has opposed what he calls “job-killing” trade deals, promising to impose high tariffs as a way of reversing the decline in manufacturing jobs and to deport immigrants.
When it comes to presidential elections, the economic trend is more important than any particular number, said Lynn Vavreck, a professor of political science at University of California, Los Angeles. “As long as it’s going in the right direction, that’s a good sign for the incumbent party,” she said.
That is why Hillary Clinton, the Democratic standard-bearer, has focused more on the steady economic improvements over President Obama’s two terms and the steep decline in the jobless rate from the recession’s peak of 10 percent. While acknowledging the economy “isn’t yet where we want it to be,” Mrs. Clinton has argued that the United States is “stronger and better positioned than anyone in the world.” She has endorsed a higher minimum wage, expanded paid leave, more money for job training and a multibillion-dollar infrastructure plan.
Such public spending would certainly bolster public sector employment, which has still not recovered to its pre-recession levels.
In the private sector, skilled workers are finding themselves in demand, as higher wages are dangled.
“I travel all over the country and everywhere I go, I sit down with C.E.O.s and ask them what their No. 1 problem is,” said Steve Rick, chief economist at CUNA Mutual Group, which provides insurance and financial services for credit unions nationwide. “They say, ‘Just finding qualified people from a teller to a mortgage home officer.’”
Turnover is also rising at these financial institutions, he said, as “people are getting better offers elsewhere.”
David Lukes, chief executive of Equity One, a commercial real estate investment company, said that for the kind of workers he is looking for — administrators, salespeople, accountants, paralegals, construction managers — the labor pool is not that deep.
“I’ve had the troubling experience of losing good employees,” Mr. Lukes said, who has increased wages and perks like flexible hours and stock incentives to keep the competition at bay. “Reward programs are much more important than they were three, four and five years ago.”
Ian Siegel, co-founder and chief executive of ZipRecruiter, which aggregates job postings and distributes them to job seekers, said that demand was down from the peaks of 2015, but hiring was still strong in health care and warehousing. Construction workers are also keenly sought in some cities, he said, with postings that promise relocation packages, especially for managers.
Matthew Ferguson, chief executive of the online job site CareerBuilder, which recently commissioned a survey of hiring managers and workers, said employers indicated they were being pressured to raise wages for skilled and semiskilled workers. Still, he has not seen any outsize bump or drop in hiring.
“We’ve just had a slow and steady labor market in the last couple years,” he said, “and I’m guessing that will continue for the next six months.”