June Blows Out Job Gain Expectations

July 5, 2019
Author: ThinkWhy Analyst

The U.S. nonfarm total employment increased by 224,000 jobs in June. Unemployment rate went up slightly to 3.7 percent. The headline number beat economist’s expectation for the month as consensus forecasts for the month was approximately 160,000 jobs. Job growth has averaged about 172,000 jobs per month through June 2019 compared to a 235,000 job gain for the same period in 2018.

U.S. Monthly & Annual Job Gain | June 2019

• Change in total nonfarm payroll employment for April was revised down from 224,000 to 216,000, and the change for May was also revised down from 75,000 to 72,000. With these revisions, employment gains in April and May combined were 11,000 less than previously reported.

• Over the year, average hourly earnings have increased by 3.1 percent during June 2019

• Among those unemployed, every group saw flat trend during June 2019. The number of workers who remained jobless for 27 weeks or more was little changed at 1.4 million in June and accounted for 23.7 percent of unemployed.

• The unemployment rate went up slightly to 3.7 percent

• Labor force participation rate went up slightly from 62.8 percent in May 2019 to 62.9 percent in June 2019

June Job Growth by Industry

Industry Movement

Professional and Business Services: Employment by industry job gain was led by Professional and Business Services producing 51,000 jobs.

Within this industry, tech-related job gain captured by Professional and Technical Services was roughly 29,900. During the first half of 2019, job gain in the Professional and Business Services industry has averaged 35,000 jobs compared to 47,000 jobs during the same period in 2018.

Education and Health Care Services: Education and Health Care Service industries produced approximately 61,000 jobs, which indicates a substantially higher increase than job gain seen during May 2019.

Within this industry, Healthcare and Social Assistance amounts to most of the job gain (+50,500 jobs). During the last 12 months, Health Care added 403,000 jobs, putting it in the second spot. Annual pace of job growth in the Education and Healthcare Services industry was 2.5 percent during June 2019.

Leisure, Hospitality and Construction: Blue collar jobs in Leisure and Hospitality and Construction produced 8,000 and 21,000 jobs, respectively. Leisure and Hospitality showed a better job gain in May than April 2019. This becomes a surprising trend as this industry typically expects job gains in the summer season.

Manufacturing: Manufacturing saw a huge comeback during June 2019 as the industry produced 17,000 jobs, following four months of little change. For 2019, growth in the industry has averaged 8,000 per month, compared with an average of 24,000 per month during the same period in 2018.

Other Industries: Employment in other major industries showed little change, however, Government jobs picked up by 33,000 jobs after shedding jobs in May 2019.

Job Openings Outpacing Labor Supply

Currently, there are 1.56 million more job openings than those unemployed. Job openings started to outpace unemployed persons starting in March 2018 and since June 2018, the gap between the two series has averaged over 1.25 million.

There are 96 million Americans outside the labor force that are not joining. Some of this population consists of retirees and others who have responsibilities or disability restricting them from joining the labor market.

Labor Shortage Analyzed

June Job Openings & Unemployment

Lack of skilled labor and those electing not to join the labor force are contributing to the labor shortage. Both large and small companies are now openly pointing out their frustrations. Open positions are going unfilled due to the lack of skills from the applicants. The solution to this issue is not immediate since acquiring skills take time. Some remedies may come from companies outsourcing and some companies may need to look hard at their wage and benefit offerings to lure skilled work their way.

During the 12 months ending in April, hires totaled 69.6 million and separations totaled 66.8 million, yielding a net employment gain of 2.8 million. These totals include workers who may have been hired and separated more than once during the year.

What to Expect

At this stage of the economic cycle, some reduction to job growth is expected. Although this reduction is expected, continue to see moderate job gains for the remainder of 2019, below the growth rate seen in 2018. The current pace of growth will slow compared to the first half of 2019. The annual pace of job gains is at 2.347 million jobs or 1.6 percent during 2nd quarter of 2019.

• Long-term, magnitude of job growth is expected to slow meaningfully starting late 2020 and will bottom during the 3rd quarter of 2021

• Expect gradual increases during late 2021, with the magnitude of growth expected to increase pace during 2022 and continue at a robust trajectory through 2024

June JobGains

ThinkWhy™ It Matters

The rebound in job gains this month shows that the economy continues to grow. The unemployment rate remains at historically low levels and wage gains continue to climb. There are currently more job openings than unemployed persons in the economy, indicating companies need more employees to fuel growth.

In this economic condition, companies should prepare for the following:

• Pressure to hire less skilled labor to fill key roles

• Increased investment in training, skill enhancement and outsourcing

• Higher wages on initial salary and benefit offers to attract talent

• Greater investment in automation of workflows

• Emphasis on employee engagement and retention