June 2019 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm payroll employment rising by 224,000 jobs in June (+165,000 expected). Also, combined April and May employment gains were revised down by 11,000 (April: -8,000; May: -3,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked up to 3.7% as expansion of the labor force (+335,000) exceeded growth in the number of employed persons (+247,000). 

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Observations from the employment reports include:

* For a change, the establishment (+224,000 jobs) and household survey results (+247,000 employed) were in general agreement. Also, the BLS’s headline estimate may have been somewhat conservative; had average (since 2009) June CES (business birth/death model) and seasonal adjustments been used, job gains might have amounted to a far more robust +419,000.

* Manufacturing gained 17,000 jobs in June. That result is reasonably consistent with the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which expanded at a faster pace in June. Wood Products employment rose by 800 jobs (ISM decreased); Paper and Paper Products: -900 (ISM increased); Construction: +21,000 (ISM increased). 

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* The number of employment-age persons not in the labor force (NILF) fell (-158,000) to 96.1 million. This metric seems to have leveled off since the latter half of 2018. Meanwhile, the employment-population ratio (EPR) was unchanged at 60.6%; roughly, then, for every five people being added to the population, three are employed. 

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* With absolute growth in the labor force nearly double that of the civilian population, the labor force participation rate edged up to 62.9%. Average hourly earnings of all private employees increased by $0.06, to $27.90, resulting in a 3.1% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose by $0.04, to $23.43 (+3.4% YoY). Because the average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours, average weekly earnings increased by $2.06, to $959.76 (+4.9% YoY). With the consumer price index running at an annual rate of 1.8% in May, workers appear to have gained -- by official metrics, at least -- purchasing power in June. 

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* Full-time jobs jumped by 453,000. Those employed part time for economic reasons (PTER) -- e.g., slack work or business conditions, or could find only part-time work -- slipped by 8,000. Those working part time for non-economic reasons rose by 158,000 while multiple-job holders spiked by 301,000. 

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For a “sanity check” of the employment numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in June shrank by $9.6 billion, to $193.8 billion (-4.7% MoM, but +4.3% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending June was 7.5% above the year-earlier average -- well off the peak of +13.8% set back in September 2013. 

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.