After a pitiful May jobs report, the U.S. economy added a whopping 287,000 jobs in June, giving economists and American workers something to smile about.
That economic pause you were worried about?
It never happened.
— Justin Wolfers (@JustinWolfers) July 8, 2016
Over the last three months, the U.S. economy has averaged 147,000 jobs per month. May’s “unambiguously weak” jobs report (as noted by economist Mohamed El-Erian last month) appears to be an aberration — largely a result of Verizon workers on strike. About 35,000 telecommunication workers were not on company payrolls while the May’s survey was conducted.
But in June, those numbers reversed. About 28,000 telecommunications jobs were added — largely the result of striking workers returning to work, the Bureau of Labor Statistics reported.
It’s a reminder — as we always say here — to never put too much stock in one month’s numbers — including this month’s. “The month to month is noisy,” said Douglas Holtz-Eakin of the conservative American Action Forum.
The major revisions from the past two months show just how noisy monthly jobs reports can be. The number of jobs added in May was revised from 38,000 down to a mere 11,000. With April’s upward revisions of 21,000 jobs, job gains were overall 6,000 less than previously reported.
Meanwhile, the unemployment rate, which fell to 4.7 percent in May, rose to 4.9 percent in June. This was a largely a good thing, as it meant that more Americans were entering the labor force and looking for jobs. But because most of these Americans haven’t found jobs yet, they are considered “unemployed.” (Remember, the Bureau of Labor Statistics only counts you as unemployed if you have looked for work in the prior four weeks.)
As Neil Irwin from the New York Times aptly put it:“The unemployment rate rose 0.2% to 4.9% for both good reasons (people joined labor force) and bad (only a small [gain] in employed).”
Meanwhile, the Bureau of Labor Statistics’ U-6, which measures unemployment and underemployment, inched down from 9.7 to 9.6 percent. Our more comprehensive Solman Scale U-7, which includes involuntary part-time workers and anyone who says they want a job, no matter how long it’s been since they last looked, fell from 12 percent to 11.7 percent.
This improvement was largely a result of the decrease in part-time workers for economic reasons. “Other things being the same, you would’ve expected the U-6 to go up because basic employment went up,” said Holtz-Eakin. “But the decline in involuntary part-time workers was significant enough to offset that.”
Alas, the jobs report couldn’t all be good news.
“Wage growth was quite weak,” said Holtz-Eakin. “That’s been a chronic disappointment in these jobs reports.”
After rising 6 cents in May, average hourly earnings rose only 2 cents in June, which comes out to be a 0.9 percent increase over the month. “Inflation is well above nine-tenths of a percent,” noted Holtz-Eakin, which means that “workers are losing ground.”
Still, over the year, earnings have increased 2.6 percent. Not everyone is satisfied with such growth, however.
“Two-point-six year over year is better than we’ve seen. Am I celebrating? No,” said economist Elise Gould of the left-leaning Economic Policy Institute. “We want wage growth more in the 3.5 percent range.”
Payroll jobs is one piece of the puzzle. American workers need stronger wage growth for full employment. pic.twitter.com/vGxS3LUMyI
— Elise Gould (@eliselgould) July 8, 2016
THE BOTTOM LINE
“Two hundred eighty-seven thousand definitely gives me optimism,” said Elise Gould, noting that she is still disappointed in you the prime-age employment-to-population ratio, the share of the population between 25 and 53 that are working. “That didn’t move this month and hasn’t moved all that much in the past few months.”
There's still lots of room for improvement in the share of the population 25-54 years old who actually holds a job. pic.twitter.com/AkNNrh8iTD
— Elise Gould (@eliselgould) July 8, 2016
June’s job report “is solid, I don’t think it’s great,” said Holtz-Eakin. “I believe both last month’s numbers and this month’s numbers are aberrations. But if you look at the average, the average is probably about right — 140,000 to 150,000. So that’s a good number, but it’s not a spectacular average.”
If we continue to add jobs at a pace of 147,000 jobs a month — the average for the past three months — we’ll close the jobs gap in a year and six months. As described by the Brookings’ Hamilton Project, the jobs gap “is the number of jobs that the U.S. economy needs to create in order to return to pre-recession employment levels while also absorbing the people who enter the potential labor force each month.”
And if we keep adding jobs at a rate of 204,000 jobs per month — the average of the past 12 months — we’ll close the jobs gap in less than a year.