June U.S. Employment Report Shows Solid Trends

Economic Straight Talk

  • Today’s national employment report gives cause for continued confidence in employment and economic growth. Employers added 222,000 jobs in June, and April and May numbers were revised up by 47,000 jobs. Over the last year, the U.S. economy added a total of 2.24 million jobs.
  • June has been the strongest month for job growth in the last three years. Though this June was a bit weaker than previous years, the slowdown is consistent with exceptionally low unemployment levels.
  • The U.S. unemployment rate increased slightly, though it is down by 0.4 percentage point since January. Again, the strength of the labor market and structural changes in the economy are causing the shifts. Among long-term unemployed Americans, there are still 1.66 million who are looking for a job. That level, while continually trending down, remains elevated. This issue highlights the structural problem of worker displacement caused by the technological revolution.
  • While June’s employment report is overall solid, the lingering issue of lagging wage growth remains. Average hourly earnings increased 0.2 percent for 2.5 percent annual growth. The low pace reflects shifting economic fundamentals, such as low productivity and low inflation. And while economists have deliberated over these fundamentals, it is not clear that monetary policy or even fiscal policy can change them.
  • The rebound in June’s employment numbers from previously weaker reports in April and May is also evident among tech-sector jobs, which are critical for the Bay Area. According to the CompTIA IT Employment Tracker, the tech sector created 8,400 jobs in June, with four in five sector categories adding jobs. So far in 2017, the tech sector has added 61,900 jobs, and June’s growth outpaced the manufacturing, retail, and transportation industries. Software services and computer system design led the growth — jobs that are very important for the Bay Area’s economy. California’s May job numbers from the state Employment Development Department showed that the information sector added 9,600 new jobs, a solid reversal from slowing trends recorded in previous months.
  • Nevertheless, one of the structural problems that remains is the mismatch between employer-needed skills and existing labor-force skills, which will constrain future job additions in some California markets. In another report released in early June, the U.S. Bureau of Labor Statistics indicated that the number of job openings increased to a series high of 6.0 million ending in April. At that level, the number of unemployed persons per job opening, at 1.2, is at the lowest level since the BLS started tracking that statistic in 2002. The statistic reached a high in 2010, at 6.6 unemployed individuals per job opening. In other words — though only theoretically — almost all unemployed people could find a job if they had the right set of skills.

Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.

(Promotional Photo: iStock/Tempura)

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