Friday, July 2, 2021

A big June for jobs. Even more than the typical June

You may have sensed that the economy was rolling as the weather warmed and COVID faded as a major restriction on growth. But we hadn’t seen job creation kick into the next gear until today.
Job growth leaped higher in June as businesses looked to keep up with a rapidly recovering U.S. economy, the Labor Department reported Friday.

Nonfarm payrolls increased 850,000 for the month, compared with the Dow Jones estimate of 706,000 and better than the upwardly revised 583,000 in May. The unemployment rate, however, rose to 5.9% against the 5.6% expectation….

As the data continues to point higher, economists are looking for GDP growth in the second quarter to approach 10%, a stunning continuation of a rebound helped by vaccines that have sharply reduced Covid-19 case rates along with hospitalizations and deaths.
There are some interesting sidelights to the report, when you dig into it. First of all, the seasonal adjustments were a big part of this report, and inflated some jobs numbers while deflating others.

One of the big “increases” in this jobs report came from government, which added 188,000 jobs on a sesonally adjusted basis, and 193,000 on the state and local side. But all the “growth” was in education, and it’s because fewer people left the sector than normal as the school year ended in June.

State + local govt education sector jobs, June 2021
State govt education
Seasonally-adjusted +74,500
Non seasonally-adjusted -203,900

Local govt education
Seasonally-adjusted +155,200
Non seasonally adjusted -208,700

Even with this public education job "growth", we are down more than 71,000 jobs on the state side and nearly 358,000 fewer on the local side vs June 2019. If we go back to the start of 2019 and use the non-seasonally adjusted numbers, you can see where the education layoffs of 2020 were not recovered during the regular 2020-21 school year, and the total number of education jobs didn't get back to the peaks of 2019 and 2020. As a result, there are less workers available to end up leaving/losing their jobs in June.

On the other hand, adjusting for typical Summer hiring knocked down some big numbers of new jobs in service sectors that are coming back as the overhang of COVID fades away.

Change in jobs June 2021
Bars and restuarants
Seasonally-adjusted +194,300
Non seasonally-adjusted +290,200

Seasonally-adjusted +155,200
Non-seasonally adjusted -208,700

Arts, entertainment and rec
Seasonally-adjusted +155,200
Non-seasonally adjusted -208,700

But even with the deflated numbers, the food services, accommodations, and entertainment industries continued to recover from their large-scale losses from 2020, and the leisure and hospitality sector overall accounted for 343,000 more jobs on a seasonally-adjusted basis in June.

The household survey wasn’t as good, as shown by the unemployment rate bouncing back to 5.9%. On a seasonally-adjusted basis, labor force grew by 151,000, but 18,000 fewer people identified as employed. But this also was skewed by seasonal adjustment.

Household survey June 2021
Labor Force
Seasonally-adjusted +151,000
Non seasonally-adjusted +1,560,000

Seasonally-adjusted -18,000
Non seasonally-adjusted +505,000

On a raw basis since February, as vaccinations ramped up and weather warmed, 2.15 million more people have joined the work force, and 2.76 million more have said they are employed. So even though the seasonally-adjusted unemployment rate has only dropped by 0.3% in that time, the household survey still is showing that more people are working and entering the work force, which are steps in the right direction. I concede that some of the non-seasonally adjusted additions in labor force and employment may be seasonally inflated, but given that we are now operating under much fewer restrictions and infections than we were in February, I wouldn’t be surprised to see many of those people stay on the job even as the temps cool off later this year. Let’s see if my instinct is correct.

But while this June jobs report shows a strong step up in our recovery, and while we have more than 3 million more jobs now compared to what there were in January, the 5.9% unemployment rate and still-sizable jobs deficit shows we still need a lot more months like it before we return to our pre-COVID levels.

Some of that deficit might be sorted out if businesses stay on at these levels of staffing in Fall, when layoffs usually happen (thereby causing strong job “gains” that result from retaining the same amount of jobs). But what we can’t do is shrug and step off of the gas pedal in the misguided belief that things are back to pre-COVID “normal”.

Things are not normal, and there are a lot of Americans who are going to have to ride out more adjustments to the post-COVID reality. We’re going to need to continue efforts to keep up demand and support for the 2nd half of 2021 if we want to avoid stalling out at a point that is well below this economy’s full potential.

No comments:

Post a Comment