Tuesday, July 12, 2016

Spring Employment Surges

Popular Economics Weekly

Total nonfarm payroll employment increased by 287,000 in June, and the unemployment rate rose to 4.9 percent, said the U.S. Bureau of Labor Statistics Friday. It means last month’s 11,000 private payrolls was a ‘Yuge’ aberration. How so? Job growth occurred in leisure and hospitality, health care and social assistance, and financial activities. Employment also increased in information, mostly reflecting the return of workers from the Verizon strike.

May’s aberration was in part because of so-called seasonal adjustments, which means the BLS likes to deduct the average of increases over the past couple of years from the actual total. For instance, actual, non-seasonally (NSA) adjusted June non-farm payrolls increased +682,000 over May, and the NSA increase in May was +669,000 jobs, but that’s too big a number for statisticians. Hence the BLS said just 11,000 more payroll jobs were added in May than was normal for that time of year.

But other indicators showed much larger job increases that I’ve reported on in the past. Such as a jump in the ISM non-manufacturing index and consumer spending, extremely low layoffs and record job openings that suggest the labor market remains the healthiest it’s been in years. The June jobs report also offers confirmation the U.S. economy is expanding moderately. I predict a Q2 GDP growth rate even higher—between 3 to 4 percent after barely rising 1.1 percent in Q1 2016, and keeping a recovery that just turned seven years old intact.

The other less reliable Household Survey that includes self-employed showed that the unemployment rate increased by 0.2 percentage point to 4.9 percent in June, and the number of unemployed persons increased by 347,000 to 7.8 million who were now looking for work. It was the reason why the unemployment rate jumped from 4.7 to 4.9 percent, as more people entered the workforce.

These increases largely offset declines in May and brought both measures back in line with levels that had prevailed from August 2015 to April. Leisure and hospitality added 59,000 jobs in June, following little employment change in the prior month (It’s the beginning of vacation months).

The ISM’s Non-Manufacturing Business Activity Index increased to 59.5 percent, 4.4 percentage points higher than the May reading of 55.1 percent, reflecting growth for the 83rd consecutive month, at a faster rate in June. The New Orders Index registered 59.9 percent, 5.7 percentage points higher than the reading of 54.2 percent in May. The Employment Index grew 3 percentage points in June after one month of contraction to 52.7 percent from the May reading of 49.7 percent.

In June, employment increased in performing arts and spectator sports (+14,000), after edging down in May. Employment in food services and drinking places changed little over the month (+22,000). Health care and social assistance added 58,000 jobs in June. Health care employment increased by 39,000 over the month. Job gains occurred in ambulatory health care services (+19,000) and hospitals (+15,000), about in line with average monthly gains over the prior 12 months in each industry. Within social assistance, child day care services added 15,000 jobs in June.

And consumer spending is also rising at 4 percent in the BEA’s latest personal income and expenditure survey. April spending rose 1.1 percent for the best monthly gain since August 2009. And May rose 0.4 percent, the second best in since November last year, says Econoday. April and May together track at 4 percent annualized growth which is why I see at least a 3 percent increase in second-quarter GDP, as I said. 
Harlan Green © 2016

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