U.S. Employment Growth Disappoints in June; Earnings Gain Steadies & Unemployment Rate Slips

Nonfarm payrolls increased 209,000 last month (2.4% y/y) after rising 306,000 in May and 217,000 in April, revised from 339,000 and 294,000, respectively. Expectations had been for a 225,000 rise in the Action Economics Forecast Survey.

Average hourly earnings increased 0.4% in June for the third consecutive month. The May rise was revised from 0.3%. The 4.4% y/y earnings increase remains down from a high of 5.9% y/y in March 2022. A 0.3% June increase had been expected.

The unemployment rate, measured in the household survey, eased to 3.6% in June from 3.7% in May. Expectations had been for 3.7%. Household employment increased 273,000 after falling 310,000 in May. The labor force rose 133,000 following a 130,000 rise. The overall unemployment rate, including workers who were marginally attached & working part-time for economic reasons, rose to 6.9% from 6.7%.

In the establishment survey, private-sector employment rose 149,000 in June (2.4% y/y) after a 259,000 May increase. Factory sector jobs improved 7,000 (1.2% y/y) after falling 3,000 during May. Construction sector employment rose 23,000 (2.5% y/y), the same as in May.

Private service-producing employment increased 120,000 in June (2.5 % y/y) after improving 236,000 in May. Increases continued to vary greatly amongst service sector categories. Education & health care jobs gained 73,000 (4.2% y/y). Professional & business services employment rose 21,000 (2.1% y/y) including a 12,600 decline (-3.6% y/y) in temporary help employment. Leisure & hospitality employment rose 21,000 (4.7% y/y). Financial sector employment increased 10,000 (1.1% y/y). Trade, transportation & utilities hiring fell 22,000 (+0.7% y/y). Information sector hiring held steady (+0.1% y/y).

Government sector payrolls rose 60,000 last month (2.8% y/y) after increasing 47,000 in May. Local government jobs increased 32,000 (2.4% y/y). State government employment improved 27,000 (3.2% y/y) and federal government payrolls rose 1,000 (2.3% y/y) in June.

Private-sector average hourly earnings rose 0.4% in June. Earnings in the goods-producing sector improved 0.5% (4.9% y/y). Earnings in construction rose 0.2% (4.7% y/y), while factory sector earnings strengthened 0.7% (4.9% y/y), the strongest increase since January 2022. In the private services sector, earnings rose 0.3%. The y/y increase of 4.2% is reduced from a high of 6.1% in March 2022. Financial activities earnings rose 0.8% (4.4% y/y). Trade, transportation & utilities sector pay increased 0.3% (4.8% y/y) last month. Professional & business sector earnings also rose a modest 0.3% (4.5% y/y) for a second month. Private education and health services pay increased 0.3% (3.3% y/y). Leisure & hospitality earnings gained 0.4% (5.6% y/y), well below the 14.0% y/y December 2021 peak. Information sector pay fell 0.7% (+3.2% y/y) in June.

The length of the average workweek edged higher to 34.4 hours in June, down from a peak of 35.0 hours in January 2021. The workweek in the goods-producing sector of 39.9 hours compared to 39.8 hours in the prior two months. The construction sector average workweek rose to 39.0 hours, while the factory sector workweek remained at 40.1 hours for the third straight month. The average workweek in the private service sector was 33.3 hours for a fourth consecutive month, but remained below the 34.0 hour high early in 2021. Financial sector hours fell to 37.4 and information services hours rose to 36.3. Professional & business service hours edged up to 36.5 from 36.4 hours, but were down from a January 2021 high of 36.9, while leisure & hospitality hours ticked higher to 25.4.

The private sector aggregate weekly hours index, a key indicator of production and income, rose 0.4% (1.9% y/y) in June, after slight declines in three of the prior four months. This left the average level of the hours-worked index during Q2 unchanged from the Q1 average.

The household survey indicated a dip in the jobless rate to 3.6% in June and was accompanied by a steady 62.6% labor force participation rate, where it’s been for four straight months. The participation rate for teenagers dropped to 36.3% from a November high of 37.8%. For workers aged 20-24, the rate fell to 71.0% and reversed its May increase. For workers aged 25-54, the rate edged higher to 83.5%, the highest level since May 2002. For individuals 55 and over, the rate slipped to 38.3% in June, remaining well below its 40.5% peak in July 2019.

The employment/population ratio for all workers held in June at 60.3%. It remained below its reading of 61.1% in February 2020 just prior to the pandemic.

The average duration of unemployment fell in June to 20.7 weeks from 21.2 weeks in the prior month, remaining below a 32.0 week high in June of 2021. The median duration of unemployment rose minimally to 8.7 weeks from 8.6 weeks, but remained below its 19.9 week high in June 2021.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.