Inside the June Payroll Data

The headline jobs data for June looked great, as nearly 300,000 jobs were added. As John Canally put it though, “On a scale of 1 to 10, with 10 being the best jobs report ever – I’d put this current report at a 6 or 7.” Things were good, but under the surface, maybe not as good as the headline number suggested.

  • 287,000 jobs were added in June, well above the expectations of 180,000. May was revised lower to 11,000 from 38,000.
  • This was the highest monthly gain since October 2015 added 295,000.
  • The one-month jump of 276,000 jobs (from 11,000 to 287,000) is the largest monthly jobs growth since 309,000 in October 2010. October 1945 added more than 2 million jobs, the largest monthly jump ever.
  • The strong June reading came after a two-month lull in job creation in April and May that saw the economy create an average of 80,000 jobs per month.
  • Our view is the strong number in June overstates job strength, just as the weak March/April data overstated labor weakness.
  • Jobs have been positive for a record 69 straight months, with the previous record of 48 straight ending in 1990.
  • The three-month average of jobs growth is 147,000, versus 250,000 at this time last year—showing a bigger trend lower for jobs growth over the past year. We think by the end of the year that may downshift to the 125,000 to 150,000 range.
  • The unemployment rate ticked up to 4.9% from 4.7% last month. Over the past 12 months, the unemployment rate has averaged 5.0%.
  • The participation rate came in at 62.7%, as it continues to hover near the lowest level since the late 1970s.
  • Wage growth ticked up to 2.6% year-over-year from 2.5% in May, inching closer to its recent peak in December 2015 year-over-year move of 2.64%.  That was the highest year-over-year number since July 2009.

IMPORTANT DISCLOSURES
The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The monthly jobs report (known as the employment situation report) is a set of labor market indicators based on two separate surveys distributed in one monthly report by the U.S. Bureau of Labor Statistics (BLS). The report includes the unemployment rate, non-farm payroll employment, the average number of hours per week worked in the non-farm sector, and the average basic hourly rate for major industries.

This research material has been prepared by LPL Financial LLC.

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