June 2023 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed nonfarm employers adding 209,000 jobs in June (213,000 expected) -- the first “miss” relative to expectations since April 2022. April and May 2023 employment changes were revised down by a combined 110,000 (April: -77,000; May: -33,000); in fact, employment gains have now been revised lower for every historical month in 2023. Meanwhile, the unemployment rate (based upon the BLS’s household survey) slipped (-0.1 percentage point) to 3.6%, as the change in the number of employed (+273,000) was nearly double the expansion of the labor force (+133,000). 

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Observations from the employment reports include:

* For a change, the two surveys were directionally consistent, and the jobs gains were reasonably close to the change in employed workers.

* Goods-producing industries added 29,000 jobs; service providers: +180,000. Industries with significant employment growth included government (+60,000), health care (+41,000), social assistance (+24,000), and construction (+23,000). Total nonfarm employment (156.4 million) is now 3.8 million jobs above its pre-pandemic level in February 2020 (private sector: +4.0 million; public sector: -161,000). That said, employment is also perhaps 5.3 million below its potential if accounting for growth in the working-age population since January 2006.

Manufacturing gained 7,000 jobs. That result disagrees with the change in the Institute for Supply Management (ISM) manufacturing employment subindex, which contracted to 48.1 in June. Wood products manufacturing added 400 jobs (ISM was unchanged); paper manufacturing: -600 (ISM was unchanged); construction: +23,000 (ISM rose).

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* The number of employment-age persons not in the labor force edged up (+50,000) to nearly 99.9 million; that level is 4.7 million higher than in February 2020. Although the number of employed rose by 273,000, the employment-population ratio (EPR) was unchanged at 60.3%, which is 0.8PP below its February 2020 level. 

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* With the working-age civilian population growing by 183,000 and labor force expanding by 133,000, the labor force participation rate remained at 62.6%. Average hourly earnings of all private employees nudged up by $0.12 (to $33.58), and the year-over-year increase accelerated to +4.4%. Because the average workweek for all employees on private nonfarm payrolls expanded to 34.4 hours, average weekly earnings rose (+$7.47) to $1,155.15 (+3.8% YoY). With the consumer price index running at an annual rate of +4.0% in May, the average worker may have gained a marginal amount of purchasing power. Average hourly wages have generally lagged CPI since April 2021; average weekly wages since June 2021.

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* Full-time jobs advanced (+382,000) to 134.9 million; there are now 4.1 million more full-time jobs than in February 2020. For perspective, however, the non-institutional working-age civilian population has risen by 7.2 million during that period. 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 -- jumped by 452,000, while those working part time for non-economic reasons fell (-597,000); multiple-job holders: +233,000. 

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For a “sanity test” of the job numbers, we consult employment withholding/FICA taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in June dipped by $9.4 billion, to $245.7 billion (-3.7% MoM; +1.4% 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 down 0.7% from 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.