The latest jobs numbers from the US Labor Department’s Bureau of Labor Statistics paint an encouraging picture of the state of the labor market, with new jobs being created at a steady clip and more people joining the workforce than leaving it. Total nonfarm employment increased by 213,000 last month, while the civilian labor force grew by 601,000, edging labor force participation up to 62.9 percent.
Unemployment increased from 3.8 to 4.0 percent as the number of unemployed persons increased by 499,000 to 6.6 million, but these changes reflected the large numbers of new job seekers, not people being thrown out of work. The bureau also revised its estimates for job growth upward for the previous two months, from 233,000 to 244,000 new jobs in May and from 159,000 to 175,000 in April.
Wage growth remains lower than in previous expansionary periods, with June’s earnings numbers showing a year-over-year increase of just 2.7 percent. Average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.98 last month. Coming after a long period of wage stagnation, these numbers are better than nothing for American workers, but still below economists’ expectations and barely enough to keep pace with inflation.
“Taken at face value,” Neil Irwin interprets at the New York Times, “it’s a sign that the hot job market is succeeding at pulling people off the sidelines and into the work force”:
It’s easy to imagine people who have become disengaged from the work force who, in this tightening job market, are more likely than they were a few years ago to see help wanted signs everywhere, or to have friends and acquaintances urge them to start working.
It is the opposite of the trend from 2010 to 2012, when the unemployment rate was falling but simultaneously millions of Americans gave up even looking for work. That’s good news because it suggests that the United States economy isn’t overheating, and that it may have yet more growth potential than has been obvious.
“The key takeaway is the big jump in labor force participation,” Kevin Hassett, President Donald Trump’s top economist, tells the Washington Post. “This is exactly what we wanted to see: marginalized Americans coming back into the labor force.” The increases in participation were not uniform across the board, however. The number of men aged 20 and over in the workforce dipped by nearly 120,000 from May to June, but was offset by bigger gains in the number of women and teenagers entering the labor market.
At the same time, economists remain troubled by the continuing failure of wages to reflect the historically low unemployment rate. “It’s not your father’s labor market anymore,” Diane Swonk, chief economist at Grant Thornton, commented at the Post. “Clearly there are some sectors like trucking where wages are going up, but warehousing wages really collapsed and are only now just $12 or $13 an hour.”
Swonk and many of her colleagues also fear that new tariffs on imports from China and other countries could lead to an escalating trade war and ultimately hurt US manufacturing (which added 36,000 jobs in June). The Trump administration insists that these tariffs will ultimately improve the situation for manufacturing workers by reducing foreign competition.
While the sluggish wage growth is a blemish on the otherwise good news for job seekers, the Wall Street Journal’s Justin Lahart interprets the jobs numbers as great news for investors, indicating a strong economy with still-untapped labor market potential. Indeed, the fact that wages are not spiking means that the risk of runaway inflation remains low, so the Federal Reserve is unlikely to see any reason to accelerate its schedule for raising interest rates this year.