The U.S. Bureau of Labor Statistics reports in its employment situation release this morning that +195k jobs were added in June. This is better than what economists expected for the month and equal to May’s upward revised reading of +195k.
In his 2021 year-end letter, Baupost's Seth Klarman looked at the year in review and how COVID-19 swept through every part of our lives. He blamed much of the ills of the pandemic on those who choose not to get vaccinated while also expressing a dislike for the social division COVID-19 has caused. Q4 2021 Read More
Unfortunately, a large portion of this month’s job gains came from the retail and hospitality sectors. Professional services, however, also continues to perform relatively well.
- Mining and Logging: +1k payrolls compared to 0k last month.
- Construction: +13k payrolls compared to 7k last month.
- Manufacturing: -6k payrolls compared to -7k last month.
- Wholesale Trade: +11.3k payrolls compared to +8.3k last month.
- Retail Trade: +37.5k payrolls compared to +26.9k last month.
- Transportation: -5.1k payrolls compared to -6.8k last month.
- Information Services: -5k payrolls compared to +1k last month.
- Financial Activities: +17k payrolls compared to +6k last month.
- Professional Services: +53k payrolls compared to +65 last month.
- Education: +13k payrolls compared to +23k last month.
- Leisure and Hospitality: +75k payrolls compared to +69k last month.
- Other Services: -4k payrolls compared to +13k last month.
- Government: -7k payrolls compared to -12k last month.
The unemployment rate (U-3) was unchanged from May at 7.6%, while the broader unemployment rate (U-6) increased fairly significantly to 14.3% from 13.8%. The U-6 is back up to its level from February.
The labor force participation rate increased to 63.5% from 63.4% in May.
The employment-population ratio increased slightly to 58.7%.
I will note again as I do every month that the current labor force participation rate is very near the lowest it has been since April of 1983.
The labor force participation rate among all men was unchanged from May at 70.0%. The labor force participation rate among all women increased to 57.4% from 57.3% in May. This is the fourth consecutive month that the women’s labor force participation rate has increased.
The labor force participation rate by age group:
- 16 to 19: 35.0% compared to 35.0% last month.
- 20 to 24: 71.3% compared to 70.1% last month.
- 25 to 54: 81.1% compared to 81.3% last month.
- 55+: 40.5% compared to 40.5% last month.
Among production and non-supervisory employees, average weekly hours worked were unchanged from last month at 33.7. Average hourly earnings ticked up to $20.14 from $20.09 last month, bringing average weekly earnings to $678.72 from $677.03 in last month.
The average duration of unemployment decreased in June to 35.6 weeks compared to 36.9 weeks in May. An improvement, but still abysmal.
I always include a longer time frame on this chart though to provide some context of just how bad this recession has been for the long-term unemployed. This is still the leading employment indicator that shows how “this time is different.”
Percent of unemployed by duration:
- Less than 5 weeks: 22.9% compared to 21.3% last month.
- 5 to 14 weeks: 24.3% compared to 24.5% last month.
- 15 to 26 weeks: 16.1% compared to 16.9% last month.
- 27 weeks and over: 36.7% compared to 37.4% last month.
Employment shifts favored the older brackets this month, as their unemployment decreased while things actually worsened for those under 25. The unemployment rate of age groups in June:
- 16 to 17: 26.5% compared to 27.3% last month.
- 18 to 19: 22.6% compared to 22.6% last month.
- 20 to 24: 13.5% compared to 13.1% last month.
- 25 to 34: 7.6% compared to 7.4% last month.
- 35 to 44: 5.9% compared to 5.8% last month.
- 45 to 54: 5.7% compared to 5.9% last month.
- 55+: 5.3% compared to 5.5% last month.
The unemployment rate for men decreased to 7.8% from 7.9% in May. The unemployment rate for women increased to 7.3% from 7.1% last month.
The unemployment rate among all veterans in June was 6.3% from May’s 6.6%.
The unemployment rate among male veterans decreased to 6.1% from 6.7% last month. The wildly volatile female veteran unemployment rate was 7.6%, up from the 6.0% it was last month.
The unemployment rate increased for only 1 of the 4 races tracked by the BLS in June:
- White: 6.6% compared to 6.7% last month.
- Black: 13.7% compared to 13.2% last month.
- Asian: 5.0% compared to 5.0% last month.
- Hispanic: 9.1% compared to 9.2% last month.
Unemployment rates by education level:
- Less than a high school diploma: 10.7% compared to 11.6% last month.
- High school graduates: 7.6% from 7.4% last month.
- Some college or Associate degree: 6.4% from 6.4% last month.
- Bachelor’s degree or higher: 3.9% from 3.9% last month.
Let’s look at the “Net Wage Changes” this month. This is the payrolls added in each industry, multiplied by the average hourly wage for all employees in that industry, and then all industries summed together. This total gives us the actual hourly wages gained or lost each month.
In June, the new net wages gained were $4,148. We can see that net wage growth has been very slow in contrast with the plummet in 2008.
Wages peaked in June of 2007, so here’s a look at the cumulative change in wages beginning in July 2007.
What this shows is that in the last 6 years, wages have fallen (on this scale) by $98,000. In 2013, the average monthly net wage gains have been $4,392. At that pace, we would not return to 2007 wage levels for another 23 months.
The root of the problem of course is that so many of the jobs gained have been in the retail trade and leisure and hospitality sectors. As the lowest paying industry, hospitality jobs do not create the same wealth as a field like information services might.
The structural weaknesses developing in several industries along with the incredibly high average duration of unemployment have contributed to a slow, slow recovery.
Full table of employment changes in June:
Via floating path