by Tom Cooley and Peter Rupert
The employment report released on Thursday, before the July 4 holiday on Friday, revealed an employment gain of 223k, but the overall report left a little something for everyone, depending on point of view. The 223k number was slightly less than what many had forecast. All of the increase came from private employment as there was no change in government employment. On the negative side, there were downward revisions for the past two months, April down by 34k and May down by 26k. In fact, the revisions have all been down since January.
Average weekly hours remained at 34.5 for the fourth straight month and hourly earnings were basically flat.
The household data from the CPS was a little more discouraging. Yes, the unemployment rate fell to 5.3%. However, the labor force fell by 432k and the number employed fell by 56k, as did the employment to population ratio, falling to 59.3. Labor force participation is at an historic low. So there is no way the labor market could be described as in a robust state. The long term unemployment rate – those unemployed 27 weeks or more diped sharply.
Many of the remaining problems in the labor market – participation rates, long duration unemployment – appear to be structural, not cyclical. The structural issues have a lot to do with the way the economy changes over the business cycle, the loss of mid-level human capital jobs, a feature that has been pronounced over the past few cycles. It seems unlikely that the Fed will view these problems as impediments to a more normal monetary policy.
The JOLTS data released this morning shows the number of vacancies, 5.4 million, is the highest since the series began in December 2000, and the job openings rate also remains high, higher than at the peak of the previous cycle! However, the hiring rate fell in May, to 3.5% from 3.6% in April. Layoffs and discharges fell slightly and quits were basically unchanged.