The employment situation is a set of labor market indicators. The unemployment rate measures the number of unemployed as a percentage of the labor force. Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls. Why Investors Care
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Highlights
June job growth combined with upward revisions to May and April as well as a downtick in the unemployment rate point to steady, solid growth in the nation's jobs market. Payroll growth averaged 181,000 in the second quarter, right on the 182,000 average in the first quarter. Payroll growth isn't spectacular but it is respectable, now firmly in excess of population growth.
Non-farm payroll rose 146,000 in June, below expectations but revisions in May and April totaled a net 44,000. The combination is right at expectations of 195,000 for June payrolls. Service producing jobs showed strength with a rise of 150,000, while goods producing jobs, despite another solid rise in construction, showed weakness with a decline of 4,000.
There are trouble signs within the goods producing category: manufacturing jobs fell for a fourth month with a big 24,000 plunge. Losses were centered in auto jobs, falling 18,000 and perhaps reflecting early retooling layoffs evident in claims data. The outlook is uncertain for the auto industry, which appears to be in convulsions tied to financial troubles at GM and Ford.
Weekly manufacturing hours were unchanged at 40.4 as were overtime hours at 4.4. Weekly hours overall were also unchanged, at 33.7.
There were no significant signs of wage pressures, which is no surprise given plenty of slack still available in the jobs market. Average hourly earnings rose an as-expected 0.2%, or 3 cents, to $16.06. The year-on-year rate for earnings is an unalarming 2.7%, in line with the current productivity rate.
Like the data from the payroll survey, data from the household survey were mostly positive and headed by a one tenth downtick in the unemployment rate to 5.0% -- its lowest level since August 2001. Employment rose 163,000 in the month while, more significantly, unemployment fell 161,000. The size of the labor force was nearly unchanged while the employment-to-population ratio once again came in at 62.7%. The labor force participation rate slipped one tenth to 66.0%.
Financial markets showed little reaction to the data, which keep in line current expectations for firm economic growth.
Nonfarm payroll employment increased by an anemic 78,000 in May after a stronger showing in April. Slow growth was posted across the board. The civilian unemployment rate edged down to 5.1 percent in May, after remaining at 5.2 percent in the two previous months.
Nonfarm payrolls Consensus Forecast for June 05: 195,000
Range: 95,000 to 300,000
Unemployment rate Consensus Forecast for June 05: 5.1 percent
Range: 5.0 to 5.2 percent
Average workweek Consensus Forecast for June 05: 33.8 hours
Range: 33.8 to 33.9 hours
Average hourly earnings Consensus Forecast for June 05: 0.2 percent
Range: 0.1 to 0.3 percent
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During the mature phase of an economic expansion, monthly payrolls gains of 150,000 or so are considered relatively healthy. In the early stages of recovery though, gains are expected to surpass 250,000 per month. |
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The civilian unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis. It reveals the degree to which labor resources are utilized in the economy. |
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