Investors cheered on another strong U.S. jobs report. But beneath the surface, cracks in America’s economic recovery are beginning to appear.
At first glance, the report appeared to be strong. Non-farm payrolls increased by 223,000 in June. The unemployment rate declined to 5.3%, the lowest rate in more than seven years. (Source: Bureau of Labor Statistics, July 2, 2015.)
But for analysts willing to dig beneath the headline numbers, this report looked incredibly weak. Total civilian labor force declined by 432,000 in the month. The labor force participation rate dropped 0.3% to 62.6% in June, the lowest level since 1977.
Underemployment also remained a big problem for the U.S. labor market. In June, there were 6.5 million workers who wanted to work full time but were only able to work part time due to the lack of full-time jobs.
In June, there were 653,000 discouraged workers. These were people not looking for work because they believed there were no jobs for them.
June’s job market report also revised down job gains in the previous two months. For April, employment change was revised down from +221,000 to +187,000. For May, the number was revised from +280,000 to +254,000. In total, job gains in April and May were 60,000 lower than previously reported.
Hours and wages stayed unchanged. In June, the average workweek was 34.5 hours, and had been at this level for four months. Average hourly earnings were unchanged at $24.95. This is worrisome because the lack of growth in wages and hours would put constraints on growth in disposable income, and hence consumption.
The gain was uneven among different industries. In healthcare, employment increased by 40,000 in June. Retail trade gained 33,000 jobs. Over the year, retail trade has gained an impressive 300,000.
Financial activities increased employment by 20,000 in June. Transportation and warehousing gained 17,000 jobs. Employment in food and beverage services continued to grow rapidly, gaining 30,000 jobs in June. Over the year, food and beverage services increased employment by 355,000.
The mining sector continued to struggle, losing 4,000 jobs in June. Construction, manufacturing, wholesale trade, information, and government showed little change in employment over the month.