June employment report: Not good
The June jobs figures have been released by the BLS, and the news is not good.
Hiring around the country picked up slightly in June with employers adding 146,000 jobs — helping to push the unemployment rate down to 5 percent, the lowest in nearly four years. . . .One economist called the US labor market "anemic", and I think that's the best adjective for it.
The modest payroll gain of 146,000 jobs in June was up from 104,000 net jobs added in May. Payroll growth for both April and May turned out to be better than the government previously reported. Still, the strength of job growth seen in June was likely to disappoint economists. Before the release of the report, they were forecasting a more robust increase of around 195,000 jobs for the month.
First, the June total is nearly 50,000 jobs short of the market consensus and nearly 30,000 jobs short of Briefing.com's rather tepid forecast. While the May numbers have been revised upwards, the June tally still falls over 40,000 jobs short of the 2005 average (through May's revised numbers). May and June of this year are averaging 125,000 new jobs per month, the slowest growth since July-August 2004.
The SA figures show big contributions by professonal and business services (+56,000), health care and social assistance (+34,500), construction (+18,000) and food services and drinking places (+17,600). In fact, that's 86% of the net total growth right there. Nearly half of the professional and business services growth was in administrative and support services. In total, the big job winners last month appear to be secretaries, health care workers, cooks, wait staff, day care providers and construction workers.
Some of this gloom might be caused by seasonal adjustment. The NSA June number was 611,000, which makes June 2005 the best June since 1999. Turning to the NSA numbers, one can see the continuing importance of the real estate sector for US employment. Of those 611,000 real seasonally-unadjusted jobs created in June, we have: 196,000 in construction; 31,700 in real estate; 31,000 in architectural and engineering services. Together these three real-estate related sectors contributed 42.3% of the actual new jobs in June (the SA figure is a more reserved 22.6%).
The real state sector is beginning to get squeezed by higher interest rates, however, and thus one has to wonder how much longer this sector can carry the US economy. Yesterday Freddie Mac reported that rates on one-year ARMs are now up to 4.33%. That makes this week the second time this year that the one-year ARM has broken the 4.30% ceiling of its long-standing fluctuation band. Considering how many homebuyers rely on ARMs today (34% nationally, over 50% in every California market), squeezing the marginal buyers will have more than marginal effects.