A year or so ago, the June jobs report would have been regarded as a triumph. But employment gains have been on such a torrid pace for so long that economy watchers have come to expect better.
The US economy added 223,000 jobs last month, according to data released Thursday by the Labor Department (the Thursday release was earlier that usual, on account of the July 4th holiday weekend). The unemployment rate ticked down to 5.3 percent – its lowest level since April 2008.
It was a decent report, but well below the 233,000 added jobs analysts were expecting and a letdown from the revised 254,000 jobs added in May.
Furthermore, there were plenty of causes for worry deep into the report. For one, the dip in the unemployment rate was due in large part to an decline in labor force participation, meaning that more Americans quit looking for work and dropped out of the labor market altogether. While driven in part by demographic factors like a growing swell of retiring baby boomers, the participation decline to multi-decade lows has been a continuing worry – the share of Americans actively working or looking for work fell 0.3 percent to 62.3 percent last month, its lowest level since 1977.
That continuing slack suggests that “conditions in the labor market are, to some extent, worse than indicated by the reported steep drop that has occurred in the unemployment rate,” MFR, Inc, economist Joshua Shapiro wrote in an e-mailed analysis. “The participation rates of the youngest workers declined, which was more of a barometer of limited job prospects than of anything demographic in nature.”
Even for many active in the job market, full time jobs remain elusive. The average workweek has stalled at 34.5 hours for four months straight, without factoring in workers engaged in multiple streams of freelance or independent contract work. The number of involuntary part-time workers also went unchanged last month.
Second, wages failed to rise. Average hourly earnings for all employees on private nonfarm payrolls went unchanged at $24.95 in June, despite several companies and city and state governments making pledges to raise their minimum pay rates in recent months. This came as a surprise to many analysts, who have been waiting for the tighter labor market to eventually boost earnings in a meaningful way.
“Wage growth – widely seen as a critical indicator of when policymakers will feel comfortable that the economy can withstand higher borrowing costs – failed to impress, remaining a bothersome fly in the ointment of the recovery story,” Markit economist Chris Williamson wrote via e-mail. “Average hourly earnings were unchanged, meaning wages are up just 2 percent over the past year.”
Still, experts were quick to warn that June’s numbers were by no means dreadful, and the report capped an encouraging week overall for workers. On Tuesday, president Obama and the Labor Department unveiled a plan that would extend overtime pay to an additional 5 million salaried workers, a move liberal advocacy groups like the Center for American Progress called “a huge step forward to further bolster economic outcomes for middle-class families and address the financial squeeze felt by millions of hardworking Americans.” And the long-term trend for the job market is more hopeful than June itself might suggest. Last month marked the 64th consecutive month of private sector job growth, and other, more highly regarded measures of income growth, like the Labor Department’s Employee Cost Index (ECI) have shown promise. “This is just one report,” Shapiro writes.