KEY TAKEAWAY:According to the Bureau of Labor Statistics (BLS) recent report, employment in the U.S. increased in June 2024 by 206,000 which, combined with the downward revisions in April and May, show a slower pace compared to the strong growth seen in the first three months of the year. The unemployment rate increased to 4.1%.
Employment
In Brief: Employment numbers in June showed decent growth, although at a reduced rate. A slowdown that remains above 200,000 should be another indication that the Federal Reserve’s attempt to achieve a “soft landing” to reduce inflation is on track. Other payroll survey data indicates a steady performance in the labor market, with weekly hours holding at 34.3 and estimated real wages changing little.
Diving in: Despite this month’s promising jobs numbers, the significant decrease in temporary employment has raised some major red flags of where the labor market is headed. In this case, companies might be reducing the number temporary workers while trying to avoid major layoffs of full-time employees. If financial conditions deteriorate for these employers, they might resort to laying off their permanent employees as well.
Unemployment
The Big Picture: The U-6 unemployment rate, which includes discouraged, underemployed, and unemployed workers in the country, stayed at 7.4% in June. The U-3 unemployment rate, which indicates only the number of unemployed people actively seeking a job, was also steady at 4.1%.
What Does This Mean?: The rise in the U-3 unemployment rate, along with a rising labor force participation rate, sends somewhat conflicting messages on the labor market. On the one hand, a rising labor force participation rate suggests that people are encouraged about their employment potential, but on the other hand, the higher unemployment rate is a sign that those people have not yet found jobs.
The chart above tracks the monthly national employment figures.
The unemployment rate measures the percentage of the labor force that is currently without a job. The national unemployment rate has remained steady throughout 2023 and now into 2024, fluctuating between 3.7% and 3.9%.
U-3 unemployment rate is the most commonly reported rate in the United States, representing the number of unemployed people actively seeking a job. The U-6 rate covers discouraged, underemployed, and unemployed workers in the country.
The labor force participation rate is an estimate of an economy’s active workforce. YTD the U.S. labor force participation rate ranged between a low of 62.5% and a high of 62.8%, according to the U.S. Bureau of Labor Statistics.
How We Matched Up
Geographic Solutions: Job creation finished below Geographic Solutions' expectations of 237,000 jobs. The unemployment rate expectation of 4.0%, was just below the 4.1% result.
The Wall Street Journal: The Wall Street Journal's expectation of 200,000 jobs being added to the labor market was slightly below what was recorded in the labor market report. The unemployment rate forecast of 4.0% was just under.
ADP: According to ADP’s latest estimate, the private sector added 150,000 jobs in June, compared to the 136,000 reported by the BLS.
Key Takeaway: We saw Private Education & Health Services jobs add 86,000 jobs in May, while Government and Leisure & Hospitality combined to create 85,000 jobs.
Why: Private Education & Health Services and Government have been a major driver of employment expansion over the last year and have the benefit of being inflation-proof compared to other sectors.
Stock Down: Information and Manufacturing
Key Takeaway: Information and Manufacturing industries were flat this past month with a combined 8,000 new jobs in May.
Why: Manufacturing employment has been stagnant for eight months which carried over to May. The information sector is weighed down by job losses in telecommunications
Will job creation remain robust over the coming months?
Based on the numbers from the latest report, we anticipate employment growth will slow down but will continue to add jobs at a slower pace in the coming months. This indicates that businesses are still looking to expand but more gradually.
Do workers or employers have more power in the labor market?
Neither side has a definitive upper hand, but it appears that the decline in unfilled job openings is giving employers more influence in the job market.
How has the labor market shifted since March 2023?
The labor market has continued to add jobs without slowing down despite widespread expectations of a recession.
Geographic Solutions derives its employment forecast and unemployment rate forecast from internal data on the number of job openings, searchers, and employment and unemployment applications filed on Geographic Solutions' state client sites. The forecast uses unemployment claims data from the U.S. Department of Labor (USDOL).
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