It’s recovery spring! In the labor market, at least.
The stock market has endured several rough weeks, thanks to global economic turmoil and the prospect of the Federal Reserve scaling back its provision of monetary ether. The U.S. economy is churning ahead in low-growth mode, struggling against the sequester and higher payroll taxes at home and volatility and macroeconomic slowdowns abroad. But the jobs market, the sickest portion of the U.S. economy and a classic lagging indicator, seemed to gather strength between April and June.
Friday morning’s jobs report contained some good news. The economy added 195,000 payroll positions in June, significantly above the pace of recent growth. In addition, as it does every month, the Bureau of Labor Statistics looked back at the prior two months and revised the data. And, as has frequently been the case in recent years, BLS discovered more jobs. The April figure, reported last month as a gain of 149,000, was revised to a gain of 199,000. The May figure, initially reported as a gain of 175,000 jobs, was revised upward to 195,000. For those counting at home, that’s 589,000 new jobs in the past three months. Compared with a year ago, there are 2.293 million more Americans with payroll jobs today. That’s quite decent.
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One shift worth noting. In the early years of this recovery, the manufacturing, industrial, and production sectors often led the way in job growth. But this report shows that services, which comprise most of the U.S. economy, are now carrying the baton. Leisure and hospitality added 75,000 posts; profession and business services added 53,000; retail added 37,000 jobs; and employment in financial activities (shudder) rose 17,000. Construction added 13,000 jobs.
The unemployment rate, which is calculated from the household survey (in which BLS calls up people and asks them about their employment status), held steady at 7.6 percent in June. While the number of people reporting themselves as employed rose by 160,000 in the month, the labor force grew by 177,000 jobs. In the past year, the labor force has actually grown by nearly 700,000, a reversal of a troubling trend.
So here’s the dichotomy. It’s a pretty good time to have a job in the U.S. Firings, layoffs, and bankruptcies are trending down, which means employees are less fearful about their short-term prospects. And with the labor market tightening ever so slightly, companies finally have to pay a little more. The outstanding feature of this expansion has been that wages have continued to slide even as corporate profits have boomed. June provided some evidence that this trend may be starting to reverse. Average weekly earnings rose by 0.4 percent in June from May, and are up 2.2 percent since June 2012. By recent standards, that’s a significant raise.
But it’s still a bad time not to have a job. There is a huge amount of slack in the U.S. labor market. The official unemployment rate may be holding steady at 7.6 percent, but BLS also compiles alternate measures of “labor underutilization.” When it conducts its household survey, it asks people whether they are working part-time but would prefer to be working full-time, whether they’re discouraged, or only marginally attached to the workforce. The so-called U-6 measure takes into account all these frustrations. In June, the U-6 stood at 14.3 percent from May, and down only slightly from 14.8 percent in June 2012.
One final note. For months, we’ve been suggesting that the end of austerity-induced unemployment is at hand. Over the past few years, state, local, and federal budget cuts have led to the loss of nearly a million public-sector jobs—which doesn’t usually happen in a typical recovery. Over the past few years, I’ve dubbed this as “conservative recovery,” because the private sector adds jobs each month while the public sector cuts them. June was no different. The private sector added 202,000 jobs, while the vast government sector cut 7,000 jobs. The federal government cut 5,000 jobs and state governments slashed 15,000 positions. But in one bright spot, local government added 13,000 jobs in June, and has added 29,000 jobs in the past two months.
