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Economy in Brief

U.S. Payroll Employment and Earnings Gains Ease; Unemployment Rate Falls to Seven-Year Low
by Tom Moeller  July 2, 2015

Nonfarm payroll employment during June increased 223,000 (2.1% y/y) following a downwardly revised 254,000 May rise. The latest increase fell short of expectations for 230,000 in the Action Economics Forecast Survey. Improvement in services employment continued to lead the increase in jobs. The unemployment rate fell to 5.3% versus expectations for 5.4%. The overall unemployment rate, including marginally attached and those working part-time for economic reasons, eased to 10.5%. Average hourly earnings were unchanged (2.0% y/y) compared to expectations for a 0.2% rise.

The increase in payroll employment during June followed downwardly-revised increases in both May and April. The latest rise reflected a 4,000 gain (1.3% y/y) in factory sector jobs, no change in construction hiring (4.2% y/y) and a 3,000 decline in mining & logging jobs (-5.5 y/y). In the private service sector, a 222,000 increase (2.6% y/y) in hiring last month was powered by a 64,000 rise (3.5% y/y) in professional & business services employment. Health care & social services jobs rose 52,800 (3.0% y/y) and trade, transportation & utilities employment improved 49,000 (2.0% y/y). Retail trade hiring increased 32,900 (2.0% y/y) and employment in the leisure & hospitality sector gained 22,000 (2.9% y/y). Public sector employment remained unchanged (0.3% y/y), as did federal sector hiring (0.3% y/y). State & government employment declined 3,000 (+0.4% y/y) but local government jobs rose 3,000 (0.2% y/y).

The length of the average workweek remained at 34.5 hours for the fourth straight month. Aggregate hours worked (employment times hours) rose 0.2% (2.4% y/y). For the second quarter, aggregate hours rose at a 1.0% annual rate (2.4% y/y) after a 2.2% Q1 rise. For the last ten years, there has been a 65% correlation between the quarterly change in aggregate hours and the change in real GDP.

Average hourly earnings remained unchanged, the weakest performance in six months. Factory sector earnings declined 0.2% (+1.0% y/y) but construction sector earnings ticked 0.1% higher (2.5% y/y). Earnings in the private service sector remained unchanged (2.2 y/y) as a 0.1% rise (2.5% y/y) in the financial sector was offset by a 0.1% decline (+2.7% y/y) in leisure & hospitality.

In the household survey, the decline in the unemployment rate to 5.3% left it at the lowest level since April 2008. The fall occurred as a 432,000 drop (+0.9% y/y) in the labor force outpaced a 56,000 fall (+1.7% y/y) in employment. The labor force participation rate fell to 62.6%, the lowest level since October 1977. The number of potential workers not in the labor force rose 640,000 (1.6% y/y) to 93.626 million.

The teenage unemployment rate stood at 17.9%, down from the high of 25.9% during all of 2010. For whites, the rate was 15.5%, down from 23.2% in 2010, and for black teens, it was 30.1%, down from 43.1%. For individuals over age 20, the rate was 5.0%, below the 9.0% 2010 high. For whites, the rate was 4.3%, down from 8.1% and for blacks, it was 9.5%, down from 14.9%.

The unemployment rate for those without a high school diploma declined to 8.2% while the rate for high school graduates without college experience fell to 5.4%. For individuals with some college or an associate degree, the rate fell to 4.2% and for college graduates, it fell to 2.5%.

The labor market data is contained Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figure is in the AS1REPNA database.

Employment: (SA M/M Change, 000s) Jun May Apr Y/Y 2014 2013 2012
Payroll Employment 223 254 187 2.1% 1.9% 1.7% 1.7%
 Previous -- 280 221 -- -- -- --
 Manufacturing 4 7 0 1.3 1.4 0.8 1.7
 Construction 0 15 30 4.2 4.8 3.7 2.1
 Private Service Producing 222 246 173 2.6 2.2 2.2 2.2
 Government 0 4 -2 0.2 0.0 -0.3 -0.8
Average Weekly Hours - Private Sector 34.5 34.5 34.5 34.5
(Jun.'14)
34.5 34.5 34.4
Private Sector Average Hourly Earnings (%) 0.0 0.2 0.2 2.0 2.1 2.1 1.9
Unemployment Rate (%) 5.3 5.5 5.4 6.1
(Jun.'14)
6.1 7.4 8.1
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