After years of monthly payroll reports padded with excessive minimum wage waiter, bartender, educator or retail worker jobs, the June jobs report was notable for its top-line beat, and which was the record 93rd straight month of US job growth, offset by strong, if disappointing, wage growth, which at 2.7% came in below than 2.8% expected, perhaps due to the preponderance of part-time jobs, but nonetheless showed continued "late cycle" strength in most components even if some negative surprises were also present.
Of note: while last month's jobs report was truly impressive in terms of job gains by industry, with the highest paying adding the most workers, in June we saw a continuation of many of the trends observed last month:
- Continued strength in Goods Production: Mining (+4K), Construction (+13K) and especially manufacturing (+36K).
- Trade & Transportation Continued to Rebound: Wholesale (+2.9) and Truck Transportation (+2.5K).
Here the surprise was perhaps that just 2.5K trucking jobs were added, following complaints from the major trucking employers, all of whom have noted they can't find enough people to hire, which suggests there may be an upward revision next month.
As Southbay Research notes, there were several other factors that actually depressed the seasonally adjusted number from rising as much as 250K, chief among them a sharply negative Seasonal Adjustment (-35K) which took some wind out of the June NFP sails. According to Southbay, "usually we can blame weather (as in 2016), but this is just BLS monkeying around."
Some other highlights:
- Manufacturing (+36K): Up on auto (+12K) rebound after fire led to factory shutdowns
- Retail (-21K): Falls on weak Food (-9K) and weak Merchandise (-18K). Merchandise stores is Toys-R-Us bankruptcy layoffs
- Professional Services (+50K): Strong on the back of white collar technical workers (+25K). relatively weak Temp workers (+9K) suggests some weakness: either lack of supply (insufficient qualified workers at level of pay) or demand (employer demand is softer than surveys relate)
- Healthcare (+35K): Higher payrolls create more demand for healthcare
Looking over the past year, the following charts from Bloomberg show the industries with the highest and lowest rates of employment growth for the prior year. The latest month’s figures are highlighted.
Finally, what trends can we observe from the latest report? As Southbay summarizes, "H1 2018 has been solid and June reinforced the strength":
- Not Seasonally Adjusted payrolls are now the highest this business cycle.
- Year-to-date Payroll (seasonally adjusted) is 213K (vs 2017 181K).
But June itself had the same level of payroll adds (not seasonally adjusted) as last year 2017. So heading into 3Q, the economy is strong but may no longer be surging faster than it was last year, same time, according to Southbay. This may also mean that the peak benefit from Trump's fiscal policy is now behind us and going forward it will only serve to depress the economic trendline.