June 2021 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm employers added 850,000 jobs in June (exceeding consensus expectations of 675,000). April and May employment changes were revised up by a combined 15,000 (April: -9,000; May: +24,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked up by 0.1 percentage point, to 5.9%, as the number of employed shrank slightly (-18,000) and the civilian labor force expanded (+151,000). 

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Observations from the employment reports include:

* Goods-producing industries gained 20,000 jobs; service-providers: +830,000. Notable job gains occurred in leisure and hospitality (+343,000), public and private education (+268,300), professional and business services (+72,000), retail trade (+67,100), and other services (+56,000). Manufacturing added 15,000 jobs. That result contradicts the change in the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which contracted in June. Wood Products employment dropped by 2,600 (ISM unchanged); Paper and Paper Products: +1,500 (ISM unchanged); Construction: -7,000 (ISM not yet published).

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* The number of employment-age persons not in the labor force was essentially unchanged (-22,000) at 100.3 million. Consequently, the employment-population ratio (EPR) remained at 58.0%; i.e., nearly six out of 10 in the employment-age population are presently employed. 

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* Although the civilian labor force expanded by 151,000 in June, the labor force participation rate was stable at 61.6%. Average hourly earnings of all private employees increased by $0.10 (to $30.40), and the year-over-year increase jumped back to +3.6%. For all production and nonsupervisory employees (shown above), the tale was much the same: hourly wages rose by $0.10, to $25.68 (+3.7% YoY). Since the average workweek for all employees on private nonfarm payrolls inched down (-0.1 hour) to 34.7 hours, average weekly earnings increased by $0.44, to $1,058.88 (+4.2% YoY). With the consumer price index running at an annual rate of +5.0% in May, even those who are employed are -- on average – not keeping up with the official inflation rate.

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* Full-time jobs fell (-183,000) to 126.2 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work – dropped by 644,000, whereas those working part time for non-economic reasons jumped by nearly 1.2 million; multiple-job holders retreated by 160,000.

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For a “sanity test” of the job 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 jumped by $30.8 billion, to $241.2 billion (+14.6% MoM; +27.5% 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 May was 25.0% above the year-earlier average.

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.