Last Friday (July 7, 2023), the U.S. Bureau of Labor Statistics (BLS) released the latest labor market data—— Employment Situation Summary – June 2023 — suggesting that the U.S. labor market may have reached a turning point, but that the rate of contraction will certainly not be consistent with an impending recession. Net employment growth continued to be weak. In addition, a decline in new job vacancies and a rise in underemployment (workers forced to take part-time jobs for economic reasons) also testify to the weakness.
June 2023 Overview (seasonally adjusted):
- Payroll employment rose by 209,000 (down from 339,000 in the previous month).
- Total labor force survey employment decreased by a net of 273,000 (0.17%).
- The net increase in the labor force was 133,000 (0.08%).
- The participation rate was unchanged at 62.6% for the third straight month.
- Total unemployment measured fell by 140,000 to 5.597 million.
- The official unemployment rate fell 0.1 percentage point to 3.6% (rounded).
- The broad measure of underutilization of the labor force (U6) rose 0.2 percentage points to 6.9%, so underemployment rose.
- The employment-to-population ratio was unchanged at 60.3% (still well below the June 2020 peak of 61.2).
For those who are confused about the difference between wage (institutional) data and household survey data, you should read this blog post – The state of the US labor market is worrying – I explained the differences in detail.
Some months have smaller differences, while others have larger differences.
Salary Employment Trends
The Bureau of Labor Statistics states:
The total number of non-agricultural employment increased by 209,000 in June, among which the number of government, medical, social assistance and construction employment continued to rise.Non-farm payrolls rose by an average of 278,000 a month in the first six months
In 2023, down from the 2022 average of 399,000 per month…Government employment rose by 60,000 in June. State government (+27,000) and local government (+32,000) employment continued to trend upwards. Overall, the government has added an average of 63,000 jobs per month so far in 2023, more than double the 23,000 monthly average in 2022. However, government payrolls were 161,000, or 0.7%, below their pre-pandemic level in February 2020.
In June, the health care industry added 41,000 jobs… So far this year, the health care industry has added an average of 42,000 jobs per month, which is similar to the average monthly gain of 46,000 jobs in 2022.
Social Assistance added 24,000 jobs in June… an average of 22,000 jobs per month so far in 2023, on par with the 19,000 average per month in 2022.
Construction employment continued its upward trend in June (+23,000). Employment in the industry has increased by an average of 15,000 per month so far this year and will increase by an average of 22,000 per month in 2022…
Employment in professional and business services was little changed in June (+21,000). Monthly job growth in the sector has averaged 40,000 so far in 2023, down from 62,000 per month in 2022…
Employment in leisure and hospitality was little changed in June (+21,000). It marked the third straight month of little change in employment in the sector. Employment in the sector remained 369,000, or 2.2%, below its February 2020 level.
Retail employment was little changed in June (-11,000)… Overall, there was little net change in retail employment for the year.
Employment in the transportation and warehousing industry was little changed in June (-7,000) and has not shown a clear trend in recent months…
All in all, it was a much slower month, consistent with the slowdown observed in February of this year, where the slightly stronger results were
May 2023 now looks like an exception.
While there are no signs of a looming recession, job creation on average per month is down significantly from 2022 on a net basis.
The first graph shows the monthly change in wage employment (in thousands, expressed as a 3-month moving average to remove monthly noise). The red line is the annual average. Observations between January 2020 and January 2020 were excluded as outliers.
You can see that the population surged after the initial COVID-19 restrictions, but has slowed significantly over the past two years.
The next graph shows the same data in a different way – in this case, the graph shows the average monthly net change in wage employment (real) over the calendar years 2005 to 2023.
The red marks on the columns are the results for the current month.
Average monthly change – 2019-2023 (000s)
| Year | Average Monthly Employment Change (000s) |
| 2019 | 163 |
| 2020 | -774 |
| 2021 | 606 |
| 2022 | Chapter 399 |
| 2023 (present) | 278 |
Labor force survey data – Employment rises by 273,000, unemployment falls
Seasonally adjusted data for June 2023 shows:
1. Labor force survey total employment decreased by a net of 273,000 (0.17%) – more or less in line with the wage data.
2. The net increase in the labor force was 133,000 (0.08%).
3. The participation rate remained unchanged at 62.6%.
4. As a result (from an accounting perspective), the measured total unemployment rate fell by 140,000 to 55.97 million and the official unemployment rate fell by 0.1 percentage points to 3.6% (rounded).
The chart below shows monthly job growth since January 2008 and excludes extreme observations (outliers) from June 2020 to January 2020 that distort the current period relative to the pre-pandemic situation of the period.
The employment-to-population ratio is a good indicator of the strength of the labor market because the denominator, population, is not particularly cycle-sensitive (unlike the labor force), so movements are relatively well-defined.
The graph below shows the US employed population from January 1950 to June 2023.
In June 2023, the rate remains unchanged at 60.3%.
The peak in June 2020 before the outbreak was 61.1%.
Trends in unemployment and underutilization
The U.S. Bureau of Labor Statistics states:
The unemployment rate was 3.6% in June, with 6 million people out of work, little changed. Since March 2022, the unemployment rate has been between 3.4% and 3.7%.…
Long-term unemployed (unemployed for 27 or more weeks) was 1.1 million, little changed in June, or 18.5% of the total…
The number of people working part-time for economic reasons rose by 452,000 to 4.2 million in June, reflecting in part an increase in the number of people working less hours due to poor work or business conditions. People who work part-time for financial reasons are those who would prefer to work full-time but are doing part-time work because of reduced hours or the inability to find full-time employment.
So you can see that the slight softness is first in terms of working hours restrictions and rising underemployment.
Businesses often adjust hours before starting layoffs because they can avoid layoff costs in the first place, while assessing whether the slowdown in sales is temporary or more entrenched.
It looks like we are in the first phase of the adjustment to low activity levels.
The first graph shows the official unemployment rate since January 1994.
official unemployment rate narrow Measures of labor waste, which means that strict comparisons to the 1960s, such as the tightness of the labor market, must take into account broader measures of labor underutilization.
The figure below shows the BLS metric U6, which is defined as:
Total unemployment plus all marginally dependent workers plus total employment part-time for economic reasons as a percentage of all civilian labor force plus all marginally dependent workers.
As such, this is the broadest quantification of labor underutilization published by the Bureau of Labor Statistics.
Before the outbreak of the new crown epidemic, the proportion of U6 was 6.8% (January 2019).
In June 2023, the U6 index is 6.9%, an increase of 0.2 percentage points. It is currently 0.4 points above December 2022 levels.
It rose because of an increase in “employment for economic reasons,” the U.S. category of underemployment based on hours worked.
How is wage growth in the US?
The U.S. Bureau of Labor Statistics reports:
Average hourly earnings for all private nonfarm payrolls rose 12 cents, or 0.4%, to $33.58 in June. Average hourly earnings have increased 4.4% over the past 12 months. Private sector production average hourly earnings in June
Non-management workers rose 11 cents, or 0.4%, to $28.83.
Newest – U.S. Bureau of Labor Statistics (BLS) Real Earnings Summary – May 2023 (Published 13 June 2023) – Tell us:
Real average hourly earnings for all employees rose 0.3% between April and May…this result stemmed from a 0.3 increase
Average hourly earnings rose 0.1%, and the Consumer Price Index (CPI-U) for all urban consumers rose 0.1%.…From May 2022 to May 2023, real average hourly earnings increased by 0.2% on a seasonally adjusted basis.
Overall, inflationary pressures are easing rapidly, with nominal wage growth starting to lead to modest increases in real wages.a good sign
The table below shows the change in nominal Average Hourly Earnings (AHE) by industry and inflation-adjusted AHE by industry in June 2023 (note that we are using May CPI (the latest available) to adjust ).
This month marks the first time since the inflation outbreak that real wages have risen in many industries.
However, some industries are still lagging behind.
The graph below shows the annual growth rate of real average hourly earnings from 2008 to June 2023.
Another indicator that tells us whether the labor market is turning in favor of workers is the quitting rate.
The latest data from the U.S. Bureau of Labor Statistics (BLS) – Summary of Job Openings and Labor Turnover (Published July 6, 2023) – states:
The number of job vacancies fell to 9.8 million on the last working day in May…Hirings and total departures were little changed throughout the month at 6.2 million and 5.9 million respectively. On departures, resignations (4.0 million) increased, while layoffs and layoffs (1.6 million) were little changed. …
In May, the number of quitters and the quit rate increased to 4 million (+250,000) and 2.6%, respectively.
Thus, as of May 2023, the resignation rate is still rising, but the number of job vacancies has started to turn negative.
in conclusion
In June 2023, the latest US labor market data confirmed that the labor market is slowing, although there are no immediate signs of a recession.
The weakness is evidenced by a decline in new job vacancies and a rise in underemployment (workers forced to take part-time jobs for economic reasons).
Enough for today!
(c) Copyright 2023 William Mitchell. all rights reserved.
