I have to say that I had not expected this.
The economy added 372,000 jobs in June, a hotter-than-expected boost to the labor market that may ease worries of an impending recession, but that also complicates the job of the Federal Reserve as it seeks to quell inflation.
The unemployment rate was 3.6 percent, the same as a month earlier, the Labor Department reported Friday.
The number is in line with the average gain over the last few months, including 368,000 in April and 384,000 in May. Employers have continued to compete for workers in recent months, with initial unemployment claims rising only slightly from their low point in March.
The private sector has now regained its prepandemic number of jobs, while the public sector remains 664,000 jobs below February 2020. Other than the public sector, no industry lost jobs in June, on a seasonally adjusted basis.
“We’ve essentially ground our way back to where we were pre-Covid,” said Christian Lundblad, a professor of finance at the Kenan-Flagler Business School at the University of North Carolina. “So this doesn’t necessarily look like a dire situation, despite the fact that we’re struggling with inflation and economic declines in some other dimensions.”
Strong demand for workers is also evident in the 11.3 million jobs that employers had open in May, a number that remains close to record highs and leaves nearly two jobs available for every person looking for work. In that equation, any workers laid off as certain sectors come under strain are likely to find new jobs quickly — for a time, at least.
A good number, obviously, and one, I suspect, that will encourage the Fed to continue with (by their recent standards) aggressive rate hikes. Although there are clearly some signs that inflation might be peaking (take a look at commodity prices) my suspicion is that the central bank may well see those either as a return to somewhat more normal conditions or that the message sent out by their more aggressive stance is being received. The latter would give them no reason to change course for now, while the former (with so much still up in the air, Ukraine and all that) would provide no particular grounds for reassurance.
Earnings?
Average hourly earnings ticked up another 0.3 per cent in May, after a 0.4 per cent increase the previous period, and are now 5.1 per cent higher on a year-over-year basis.
So, not so great in real terms.
Labor participation rate (also via the FT):
[T]he labour force participation rate, which tracks the share of Americans either employed or actively looking for work, dipped to 62.2 per cent as the labour force contracted by 353,000 people. That is more than one percentage point below levels seen before the start of the coronavirus pandemic.
Jason Furman, puzzled by the disconnect between the weird combination of signs of recession and healthy jobs growth, weighs in on Twitter. Take a look for yourself, but this seemed plausible:
Demand is slowing rapidly but employers still want to hire/hold onto workers. Either because they view demand reductions as temporary (e.g., inventories), are worried about ability to hire so labor hoarding, or moving towards more normal staffing.
Interestingly, the total number of employed (152 million) remains below the pre-pandemic figure of 152.5 million in the last pre-Covid month, February 2020. Over the same period, the U.S. working age population increased by some 2 million. Tick tock.
Look out for (if I had to guess) negative revisions ahead, but my gut reaction is, Atlanta Fed or no Atlanta Fed, the chances that we are already in recession may have diminished. Meanwhile, the likelihood that the next Fed rate hike will be 75bp (already high, in my view) has increased.