The share of working-age Americans who are employed or at least looking for a job sank to the lowest rate since October 1977.+ READ ARTICLE
U.S. job growth slowed in June and Americans left the labor force in droves, according to a government report on Thursday that could tamper expectations for a September interest rate hike from the Federal Reserve.
Nonfarm payrolls increased 223,000 last month, the Labor Department said. Adding to the report’s soft note, April and May data was revised to show 60,000 fewer jobs were added than previously reported.
With 432,000 people dropping out of the labor force, the unemployment rate fell two-tenths of a percentage point to 5.3%, the lowest since April 2008.
The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell to 62.6%, the weakest since October 1977. The participation rate had touched a four month high of 62.9% in May.
In addition, average hourly earnings were unchanged, taking the year-on-year increase to a tepid 2.0%.
But labor force participation dropped
The United States labor market put in a tepid performance in June, with the addition of only 223,000 jobs, according to a report released by the Bureau of Labor Statistics on Thursday.
That was short of analysts’ exceptions, which put estimates for June job growth in the 225,000 to 230,000 territory.
According to the household survey, unemployment declined to a seven-year low of 5.3% in June, after inching up to 5.5% in May.
Though the jobs report’s top line numbers were not too bad, a closely-watched sub-indicator didn’t show such good news: hourly wages remained flat in June. That stagnation could delay a long-awaited hike in interest rates. After the May jobs report showed that wages had increased by 8 cents per hour, Federal Reserve chair Janet Yellen said at a press conference June 17 that “wage increases are still running at a low level, but there have been some tentative signs that wage growth is picking up.”
Thursday’s report—released a day early because of the observation of the July 4th holiday on Friday—also showed that labor force participation dipped by 432,000 or 0.3% in June after an increase of similar size in May. The share of Americans participating in the labor market fell back from 62.9% in May to 62.6%–its lowest since 1977.
The number of long-term unemployed who’ve been without a job for 27 weeks or more declined by 381,000 to 2.1 million in June. Over the past 12 months that figure—which currently makes up 25.8% of the unemployed—has decreased by nearly 1 million.
The overall economy added 280,000 new jobs last month, but 77% of them were in these fields.
Despite unemployment remaining steady in May, the economy still produced 280,000 new jobs, beating the average monthly gain of 251,000 from the past year, the Bureau of Labor Statistics reported Friday. Since March, jobs have increased by an average of 207,000 per month.
Huzzah for you, job seeker. Your chance for a new gig continues to improve.
Of course, you’ll have an even better shot if you concentrate your search in these five fields‑-which accounted for three quarters of the new job growth last month:
1. Professional and business services
Jobs added in May: 63,000
Jobs added past 12 months: 671,000
Particular growth areas: computer systems design and related services, temporary help services, management and technical consulting services and architectural and engineering services
2. Leisure and hospitality
Jobs added in May: 57,000
Jobs added past 12 months: 57,000
Particular growth areas: arts, entertainment and recreation
3. Health care
Jobs added in May: 47,000
Jobs added past 12 months: 408,000
Particular growth areas: Ambulatory care services (which includes home health care services and outpatient care centers) and hospitals.
Jobs added: 31,000
Jobs added past 12 months: 288,000
Particular growth areas: automobile dealers
Jobs added: 17,000
Jobs added past 12 months: 273,000
Particular growth areas: none specified
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The nation’s unemployment inched up to 5.5%
The U.S. economy added a robust 280,000 jobs in May, and the unemployment rate rose to 5.5% from a near seven-year low of 5.4% in April, according to the latest employment situation report released by the Labor Department.
That number beat economists’ expectations of 225,000, and job gains came from a wide range of sectors, including professional and business services, leisure and hospitality, healthcare, and construction, to name a few.
The jobless rate rose because more people, such as new college graduates, entered the workforce, suggesting growing confidence in the jobs market.
Importantly, the report showed that wages increased by 8 cents per hour in May, and that wage growth has averaged 2.3% over the past year. While those gains aren’t extraordinary, they show that worker pay is increasing slightly faster than inflation, which should help bolster consumer spending and the overall economy going forward.
March’s job gains were revised up from 85,000 to 119,000, but job gains in April were revised down slightly. Overall, revisions of job gains for the previous two months means there 32,000 more U.S. jobs than previously thought. Over the past three months, job gains have averaged more than 200,000 per month, a key threshold that suggests that the weak GDP reading in first quarter of this year is a temporary blip rather than a harbinger of a broad economic slowdown.
A government report shows that the labor market struggled. What does that mean for your salary?
After months of impressive gains, employers slowed down hiring last month.
Employers added 126,000 jobs in March, while employment gains for January and February were revised down. Over the past three months, businesses have increased their payrolls by 197,000 workers a month. The unemployment rate held steady at 5.5%.
Hourly earnings, however, were a positive, rising 0.3% last month. Workers have seen a raise of 2.1% over the past 12 months, though, which is barely keeping pace with inflation.
Federal Reserve Chair Janet Yellen promised in a press conference last month that “we will be looking at wage growth,” adding that “we have not seen wage growth pick up.” A lack of sustained, accelerated wage growth is one reason the Fed has kept short-term interest rates near zero since the recession.
There have been other disappointments in the economy. As the dollar has strengthened against the euro, American exports have become less competitive in the global market place at the same time that economic weakness in Europe, China and Japan have reduced demand for U.S. goods. U.S. companies are starting to take it on the chin. According to S&P Capital IQ, large corporations are expected to see a 3.1% quarterly earnings decline in the first three months of 2015, the first drop since 2009.
Meanwhile U.S. productivity, measured by the growth of services and goods produced per hour worked, declined 2.2% in the last quarter of 2014.
“Wage growth will ultimately be constrained by productivity as employers cannot let paychecks increase faster than hourly output growth for years on end,” says Jack Ablin, chief investment officer for BMO Private Bank. “While job growth is the most important barometer of economic success, healthy wages play an important supporting role. Until productivity picks up, wage gains will likely be constrained.”
James Paulsen, chief investment strategist at Wells Capital Management, points out that productivity has only grown 0.8% annually in the last five years, compared to a post-war norm of 2.4%.
What’s holding productivity back? “The problem has been a lack of investment spending,” says Paulsen. Since the recession, the private sector “has been noticeably reserved with capital spending plans. Moreover, as a percent of GDP, real public sector investment spending has been declining steadily since 2010, falling recently to a 65-year low.”
Corporations aren’t going to invest unless there’s a demand for its products, which has been muted as U.S. consumers have spent the past half decade or so dealing with debt. Government spending has been limited due to sequestration.
Whether or not the Federal Reserve will tighten monetary policy by raising interest rates before the end of the year, while key employment indicators lag, remains to be seen.
3 major economic indicators show why this might be the best time in a long time to start searching for other work.
Economists are pretty good at accounting for the unemployed and underemployed, but there’s one group that’s gone largely ignored during the economic recovery: people who have a job they don’t like, but are afraid to quit.
That’s probably because having a bad job was, at least until recently, seen as a pretty lucky problem to have. When times are tough and employment is scarce, any work is good work. But now the economy has sufficiently improved to the point where employees should stop feeling trapped in their current position and seriously consider making the change they’ve been longing for. Here’s why:
Hiring is way, way, up
Friday’s jobs report showed 295,000 jobs were filled in the month of February. That’s the 13th month in a row with more than 200,000 hirings, and the economy has added nearly 11.5 million jobs in the past five years.
That’s a lot of jobs you could have instead of the one you’re stuck in.
Open positions are way up as well
Not only has hiring increased, but the number of positions has surged to a 14-year high. There were 5 million job openings at the end of last year, the most since 2001, and the ratio of unemployed job seekers to openings was 1.7, the lowest number since 2007.
Employees are feeling more confident about quitting
A lot of smart people, including Federal Reserve Chair Janet Yellen, think one of the best indicators of economic progress is whether people have enough faith in the labor market to quit their current jobs. That statistic, known as the quit rate, has been rising and is now closing in on pre-recession levels.
If you’re feeling like it’s time to leave for greener pastures, you’ll have a growing amount of company.
A higher unemployment rate in an improving economy means more people are beginning to look for work again.
For the most part, Friday’s jobs report is clearly reason to cheer. The economy added 257,000, making January the the 12th consecutive month employers hired over 200,000 workers. The Labor Department even revised earlier figures, announcing 147,000 more jobs were created in November and December than previously thought.
But in spite of all this great news, one number seemed to stick out: the unemployment rate actually went up, jumping from 5.6 to 5.7 percent.
That’s not a big change but it doesn’t seem to jibe with everything else happening in the economy. How could the unemployment rate still be increasing when hiring seems to be at a post-recession high?
The answer is the official unemployment rate, at least by itself, doesn’t actually measure the economic recovery very well. This metric, also known as U3, is one of six different ways the Department of Labor measures unemployment, and it only includes people who are unemployed and actively looking for work. That means people who are unemployed but too discouraged to look for a job aren’t included in the unemployed population.
This quirk is what Gallup CEO Jim Clifton was talking about when he called the unemployment rate a “big lie,” but it’s actually telling the truth if you know what to look for. When hiring increases, as it has over the past year, people who previously gave up searching for work will once again start trying to find employment. This is obviously a good thing, but for the moment an influx of new job hunters is pushing up unemployment numbers because those who just began searching for work after a long break are essentially treated as newly unemployed.
“I don’t think [Friday’s unemployment bump] is a big deal,” says Elise Gould, a senior economist at the Economic Policy Institute, a left-leaning think tank. “I think that is mostly due to people coming back into the labor force—some of them finding jobs, some of them not finding jobs.”
In fact, as the economy continues to recover, it’s likely the unemployment rate will likely stay the same or even increase. “If had to project the unemployment rate, I would expect it would hold steady and could move a little up, but I don’t think we’re going to see it going down,” explains Gould. “As the economy gets stronger more people will enter the labor force and that will move the unemployment rate, potentially in the wrong direction.”
All this sounds nice in theory, but do we really know more people are entering the job market? The most accurate metric we have to answer that question is the labor force participation rate, which includes everyone who is working or looking for work. Unfortunately, that number can be misleading since many older Americans are leaving the market at the same time job-seekers are re-entering it, leading to a long-term downward trend.
Luckily, today’s report shows enough people started looking for work in January to push the labor force participation rate up a tick. It wasn’t much—less than a percentage point—but even a small increase is meaningful when the demographic tide is flowing the other way.
At least for once, a higher unemployment rate isn’t so bad.
The economic picture continues to mend, but workers still looking for better wages.
The U.S. economy added 257,000 jobs in January, the 12th consecutive month employers hired more than 200,000 workers. Meanwhile, the unemployment rate rose slightly to 5.7%.
Employers also added more employees in the end of 2014 than originally thought. The Labor Department revised November’s employment change to 423,000, compared to 353,000, and December’s to 329,000, from 252,000.
The positive monthly employment report is another sign of a building economic recovery. The four-week moving average initial jobless claims recently fell by 6,500 to 292,750 The employment cost index, which measures salary and benefits, increased by 2.3% in the last three months of 2014. And the gross domestic product grew by 2.6% in the last quarter of 2014 after climbing by 5%. This good news, along with cheap energy prices, has also pushed up economic confidence.
The economy still is not back to a pre-2008 definition of normal, however. The headline unemployment rate measures only people who are looking for work. Since the post-crisis recession, however, many people dropped out of the work force, and they have been slow to come back in. Today’s report shows the labor-force participation rate at 62.9%, a marginal increase from a month ago, but still in line with a long-term decline. The rate is five points lower than it was at the turn of the century.
Another sign that the job market recovery remains soft: Average hourly wages in January were only up 2.2% compared to a year earlier. (While that’s an improvement over last month, wages grew around 4% per year prior to the Great Recession.) Long-term unemployment is also still at elevated levels.
Modest wage growth helps to explain why inflation has remained low, even after stripping out the effect of falling prices at the gas pump. Core inflation, which strips away volatile energy and food prices, was up 1.6% year-over-year in December. That’s well below the 2% the Federal Reserve says it is targeting in deciding whether or not to raise key interest rates.
The Fed has been holding short-term rates near zero since the crisis, and is widely expected to begin raising rates this year as the economy improves. But they’ll have to weigh the encouraging signs from the new unemployment numbers against continued low inflation and wage growth, as well as the mounting economic troubles in Europe.
Sam Bullard, a senior economist at Wells Fargo Securities, shares the Fed’s belief that the labor market and economy are repairing, and thinks more hiring will push down the unemployment rate in the months to come, which will result in more money in worker’s paychecks. Eventually.
“Overall, we’re looking at an economy that’s improving,” says Bullard. “The one missing piece is a pickup in wage growth.”
After hurting the employment picture for so long, local, state and federal governments are finally adding to payrolls.
The U.S. economy continued its winning streak by adding 252,000 jobs in December, the 11th consecutive month employers hired more than 200,000 workers. The unemployment rate fell to 5.6%, a post-recession low, as various sectors (from business services to health care to construction) added to payrolls.
Boosting hiring isn’t exactly new when it comes to private businesses, which have been bolstering their staffing for every month for almost five years.
What’s different about the recent pickup in employment is the positive effect of governments (state, local and federal). While jobs aren’t being added at rapid pace, they have grown steadily over the past year, and are no longer subtracting from the labor market like they were not too long ago.
Government employment increased by 12,000 in December, compared to a reduction of 2,000 employees in the last month of 2013. Compared to a year ago, state and local governments throughout the country have added a combined 108,000 jobs.
As recently as last January the government shed 22,000 positions. Sustained, incremental growth beats much of the sector’s post-recession record, which saw employment drop off thanks to lower tax revenue and austerity measures.
Government payrolls increased by about 0.5% over the last year — which doesn’t look terribly good compared to the private sector’s 2.1% gain. But when you look at the recent gains against the 0.05% decrease in the twelve months before January 2014, you start to appreciate the recent uptick.
What’s going on?
Well, state and local government finances have stabilized and marginally improved over the past couple of years, giving statehouses and municipalities a chance to improve its fiscal situation.
Take this note from a recent National Association of State Budget Officers report which says, “In contrast to the period immediately following the Great Recession, consistent year-over-year growth has helped states steadily increase spending, reduce taxes and fees, close budget gaps and minimize mid-year budget cuts.”
The nation’s economy grew at an annualized 5% rate in the third quarter, after jumping 4.6% in the three months before. The trade deficit fell in November to an 11-month low, thanks in part to lower energy costs, which will help fourth quarter growth.
NASBO expects states’s revenues to increase by 3.1% in the next fiscal year, compared to an estimated 1.3% gain in 2014, with much of that spending dedicated to education and Medicaid.
With a more solid financial position, governments across the country are able to spend more on basic items, like construction. Public construction, for instance, increased by 3.2% last November compared to the same time last year, according to the Census Bureau.
Overall government spending has stopped following dramatically and actually picked up in the third quarter on a year-over-year basis.
Of course, government employment still has a ways to go before returning to normal. In the five years after the dot-com inspired recession, public sector employment gained by 4.5%. (It’s fallen by 2.8% since the recession ended in June 2009.) And while state budgets have normalized, Governors aren’t exactly flush with cash.
Says NASBO: “More and more states are moving beyond recession induced declines, but spending growth is below average in fiscal 2015, as it has been throughout the economic recovery.”
Not to mention hourly earnings fell by five cents, to $24.57, a decline of 0.2%.
Still, some employment growth is better than none at all.
Updated with earnings data.