Surprising strength in payroll growth and another decline in the unemployment rate threaten to make this recovery begin to feel like a real recovery.
The Bureau of Labor Statistics (BLS) released the Employment Situation report for June. The establishment survey showed payroll employment expanded by 288,000. The April and May figures were revised upward by a total of 29,000, bringing them to 304,000 and 224,000, respectively.
This brings average monthly payroll growth to 248,000 since the December/January weather slowdown. Including January, the average monthly growth has been 231,000 for the first six months of 2014, compared to the 194,000 average for the twelve months of 2013, and 186,000 in 2012.
The unemployment rate dropped to 6.1% from 6.3% in May, and 7.5% in June 2013. The household survey showed a gain of 407,000 persons employed, a 325,000 reduction in unemployed persons, and an increase of 81,000 in the labor force.
These numbers indicate steady improvement in the labor market, and an acceleration in the pace of job gains. But two other labor market statistics point to continuing weakness: part-time employees and discouraged workers. The numbers of workers employed but working part-time for economic reasons (e.g., hours reduced, only part-time work available) increased in June to over 7.5 million. This category of worker is down from its peak but remains elevated.
Discouraged workers are those who are willing to work but believe no jobs are available. They have looked for work in the most recent twelve months, but not the last four weeks. They are not included in the unemployment rate. In June there were 676,000 discouraged workers, down from its peak, but a component of the depressed labor force participation rate that overstates the improvement in the unemployment rate.
Both of these statistics suggest that the gains in job growth and the declining unemployment rate are not all they seem. A full labor market recovery won’t be complete until these underlying numbers show more improvement, but the visible strength in today’s report is encouraging.