* June's headline gain of 112,000 was composed mainly of small gains in a number of sectors, with none really standing out as leaders. The goods-producing sector shed jobs, as manufacturing declined by 11,000 and construction was unchanged. Within manufacturing, transportation equipment declined by 3,000; that, plus this morning's news of weaker-than-expected auto sales, suggests that this sector may be taking a breather. Retail showed a small gain of 7,000, with quite a few of its subsectors (including building materials) showing declines. Temp jobs expanded by just 12,000, a small number by the sector's recent standards. The star was health care, which added 30,000; it's nice to know that those rising premiums are at least putting people to work. Government declined by 5,000, mainly because of declines in local government employment. Contrary to many perceptions, the public sector now accounts for 16.4% of total employment, down from 16.6% in 1990 and 17.8% in 1980.
* Revisions to back months were negative, with 13,000 knocked off May's gain, and 22,000 of April's. The revisions were small, and the details not very revealing (though 8,000 was knocked off last month's manufacturing gain). But while downward revisions aren't unprecedented during periods of employment acceleration, it is unusual; for example, in 1994, about three-quarters of the revisions were positive.
* There wasn't much comfort in the diffusion indexes (the share of industrial sectors adding jobs). While the six- and twelve-month measures rose, that wasn't surprising, since most sectors are better off than they were before employment bottomed last August and began accelerating in March. But the one-month index fell from 64.6% in May to 57.0% in June, a level it hasn't seen since February, and the three-month measure fell from a very healthy 74.8% to a less impressive 66.4%. We did see similar numbers in 1993, as we were leaving the last jobless recovery, but not in 1994, when the Fed started tightening seriously.
* The workweek fell by 0.2 hours to 33.6, matching the all-time low in the series set several times in 2003. Aggregate hours worked were off by 0.6%, the worst performance since last December. It may be that the Reagan funeral and holiday dragged the numbers down, so we'll reserve judgment on the meaning of this for now.
* Hourly earnings were up just 0.1%, and weekly earnings were off 0.5%. In real terms, both are now off over 1% from a year ago, the weakest real wage numbers we've seen since 1991. While this is good news for profits and labor costs, with the refi and tax cut stimuli fading, we're going to need stronger income growth to keep the cash registers ringing in coming months.
* The household survey was stronger, with nonag employment up 187,000 and the employment/population ratio (EPR) rising to 0.1 point to 62.3%. While it's nice to see a rise, the EPR has been stuck in this neighborhood for over a year, and remains 2 points below where it was in 2000. The unemployment rate was unchanged, and the job market was able to accommodate most of the 305,000 new entrants. Interestingly, though, teenage summer workers seem to be having a harder time of it than last year; their EPR in June was 36.0%, down from 36.5% last June.
* Labor markets remain fairly slack. The pool of available workers - the unemployed plus those not in the labor force who want a job, a favorite measure of Greenspan's - remained at 5.8% of the civilian labor force. It's been bouncing between 5.8% and 5.9% since last November, and is a full percentage point above where it was in 2000. That slack, which is also reflected in weak wage growth, should reinforce the Fed's resolution to be "measured" about raising the funds rate.
Some early commentary on this morning's report claimed that it doesn't undermine the strength of this recovery/expansion. Actually, measured by GDP growth, this is one of the weakest post-WW II expansions. In earlier cycles, nine quarters after a trough, GDP was up an average of 21.5%; this time, it's up 12.3%. The employment performance is, of course, much worse; the gap between actual employment levels and recovery averages is now at 8.8 million.
- Philippa Dunne & Doug Henwood