Ugly Reality Hiding in the June Employment Report

Stock market analysts were absolutely giddy over this morning’s release of the June Employment Report and its headline number of 287,000 jobs added to the economy.  That’s a big number, to be sure, and, in the wake of May’s dismal jobs report, was hailed as proof that the labor market is still in fine shape, and that maybe the May report was just a statistical blip.

Given less notice was the fact that unemployment jumped two tenths to 4.9%.  Those same analysts shrugged it off as the result of more people re-entering the work force.  Yeah, that was part of it but what no one seemed to notice or report were a couple of really ugly pieces of data in the report.

The ugliest was the household survey’s “employment level.”  Month-to-month changes in this parameter are the household survey’s equivalent of the headline number of jobs created as measured by the establishment survey.  Employment level rose in June by only 67,000, far less than the number needed to keep pace with population growth.  In fact, the employment level has risen by only 23,000 since February, while the population has grown by over 800,000.

Thanks to the stagnant employment level, per capita employment edged down slightly for the third month in a row – the first time that’s happened in 3-1/2 years.  If it edges down again in July, it’ll be the first time it’s declined four months in a row since the Great Recession in 2009.

The other ugly piece of data is the fact that, as bad as the May employment report was, it got worse in June when it was revised downward from a gain of only 37,000 jobs to only 11,000 jobs.

Instead of providing proof of a labor market that’s still in decent shape, the June employment report instead – if one looks deep enough – paints a picture of a labor market teetering on recession.  Market analysts may have been fooled by the gaudy headline number but I’m not, and you shouldn’t be either.

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