U.S. Payroll Employment Gains Stronger than Expected in June

The U.S. labor market continued to post solid gains in June with nonfarm payrolls rising 372,000 (+4.3% y/y), according to the establishment survey. However, the increases in both April and May were revised down a total of 78,000. The initially reported 390,000 rise in May was revised to 384,000 and the 436,000 gain previously reported for April was revised to 368,000. Still, even after revisions, job gains have averaged 375,000 over the past three months. A 250,000 gain in June had been expected in the Action Economics Forecast Survey.

In the establishment survey, private-sector jobs were up 381,000 in June versus 336,000 in May and 368,000 in April. The May figure was revised up 3,000 while the April figure was revised down by 37,000. The Action Economics Forecast Survey had looked for an increase of 245,000 in June. Government jobs slipped 9,000 in June following an outsized 48,000 gain in May. Jobs in the federal government and state governments fell (a total of -14,000) while local government jobs edged up 5,000.

In the private sector, job gains were widespread, but led by service-producing sectors. Goods jobs increased 48,000, down from 58,000 in May while services jobs jumped up 333,000 vs 278,000 in May. Notable job gains occurred in professional and business services (+74,000 vs 69,000 in May), leisure and hospitality (+67,000 vs 68,000 in May) and health care (+77,800 vs 33,100 in May). Of note, retail jobs rebounded in June, rising 15,400 after declining 43,700 in May. In goods-producing sectors, manufacturing jobs increased 29,000, up from 18,000 in May while construction jobs slowed to 13,000 from 34,000 in May.

Total nonfarm payroll employment is down by 524,000, or 0.3 percent, from its pre-pandemic level in February 2020. However, private-sector employment has now recovered the net job losses due to the pandemic and is 140,000 higher than in February 2020, while government employment is 664,000 lower.

Private-sector average hourly earnings (AHE) rose 0.3% m/m in June, down slightly from the upwardly revised 0.4% m/m gain in May (initially +0.3% m/m). However, the annual rate slowed to 5.1% y/y. This was the third consecutive monthly decline in the annual rate (from 5.6% y/y in March) and could augur some respite for inflation pressures going forward. AHE in the goods-producing sectors was up 0.2% m/m (4.7% y/y), and AHE in the services-producing sectors rose 0.3% (5.2% y/y).

The average work week was unchanged at 34.5 hours in June with the May reading revised down 0.1 hour. In June, the average work week in goods-producing sectors slipped 0.1 hour to 39.9 hours while the average in service-producing sectors was unchanged at 33.5 hours. The aggregate hours index, a key indicator of production and income, rose 0.3% m/m (4.1% y/y) in June vs unchanged in May. Recent annual growth of this index has been well above that observed prior to the pandemic.

In contrast to the establishment survey, the household survey was much weaker in June. The unemployment rate held steady in June at 3.6%, as had been expected by the Action Economics Forecast Survey. However, the labor force fell 353,000 in June after a 330,000 increase in May with the labor force participation rate edging down 0.1%-point to 62.2%. Accordingly, employment in this survey fell 315,000 vs a 321,000 increase in May. The number unemployed fell 38,000 after having increased 9,000 in May. By contrast, the broadest unemployment rate (U-6), which is the total unemployed plus marginally attached workers plus the total employed part time for economic reasons as a percent of the sum of the labor force and all marginally attached workers, fell markedly to 6.7% in June from 7.1% in May. The June reading is the lowest in the series history dating back to 1994 and an indication that the labor market is still relatively tight.

The employment/population ratio for all workers edged lower to 59.9% in June from 60.1% in May. While it is well above its pandemic-period low of 51.3% in April 2020, it remained below its reading of 61.2% in February 2020 just prior to the pandemic.

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.