The opening sentence of the latest press release from the Bureau of Labor Statistics considerably understates the improvement in the U.S. jobs market.
It says that total non-farm payroll employment increased by 195,000 in June. What it fails to highlight is that April and May numbers were revised by +50,000 and +70,000 respectively.
Therefore, the uplift in the total number of jobs in the U.S. economy this June versus what was reported a month ago for May was actually +315,000.
As a benchmark, a good month for U.S. employment (not including revisions to previously reported results) is +200,000. The most outstanding month recently was February of this year at +332,000.
This latest June is a close second, no matter how one looks at it.
More than 90% of the latest month’s total jobs increase originated in the private services segment of the economy. I’ll have more to say about this in a moment. But first, what about construction?
The construction sector did see a net increase in jobs, but it was only +13,000. While there has been a marked improvement in new home starts nation-wide this year, there will be a lag before this translates to more work at job sites.
That gives us something to look forward to. In 2004-2005, when U.S. home starts were last at their historical “norm” – i.e., before they surged due to speculation in 2006, then plunged due to the sub-prime mortgage crisis from 2007 on – the overall level of employment in construction was higher than now by almost a million and a half.
Manufacturing employment in June contracted by 6,000. The motor vehicle and parts sub-sector, however, saw an increase of 5,100.
That gain corresponds with the strength in motor vehicle sales, which were 16.0 million units seasonally adjusted and annualized (SAAR) in June, according to Autodata Corporation. The latest month’s volume was +4.2% month to month and +11.0% year-over-year.
The major sub-sector leader within private services in the individual month of June was “leisure and hospitality” with an increase in employment of 75,000. “Food services and drinking places” went on a particular staffing binge, adding 52,000 positions in the latest month.
After years of belt-tightening due to financial worries, Americans are beginning to enjoy themselves again. The Conference Board’s consumer confidence index has risen to its highest level in five years.
Professional and business services also stepped up to the plate in June, adding 53,000 positions. Retail trade contributed 37,000 net new jobs. And, with stock markets continuing to soar, financial services firms recruited 17,000 more staff members.
Within “education and health services”, the former dropped 11,000 jobs, but the latter added 24,000, for a net gain of 13,000.
In the public sector, cuts by Washington (-5,000) and state governments (-15,000) slightly exceeded manpower increases at the local level (+13,000).
With higher expectations about finding employment, more out-of-work Americans returned to the labor force in June. The consequent increase in the participation rate caused the unemployment rate to stay the same as in May, 7.6%.
June’s strong overall employment increase is likely to stiffen the resolve of the Federal Reserve to remove some of its monetary stimulus. There is now an even greater likelihood that the Fed’s aggressive bond-buying program will be downsized beginning this fall.
In Canada, employment remained about the same in June as in May. The unemployment rate was also flat, 7.1%, according to Statistics Canada.
In effect, the latest month of “no gain” serves to smooth out (or average down) the spike (+95,000) that occurred in the previous period. Leaving out May, net new employment so far this year north of the border has been marginally negative (-14,000).
Regionally, Saskatchewan’s 3.7% jobless figure in June was the lowest among the provinces. Two other resource-rich western provinces were tied for second at 5.0%.
The services-producing sector in Canada dropped 8,000 jobs in the latest month, which was matched by an improvement (+8,000) in employment by goods-producing firms.
Opposite to the U.S. experience, establishments in “accommodation and food services” in Canada offered fewer job opportunities (-20,000) in the latest month.
Payroll departments in “information, culture and recreation” (-15,000) also chose to release employees in June.
Thankfully, “professional, scientific and technical services” (+27,000) engaged in more “headhunting”.
On a year-over-year percentage-change basis, U.S. total employment is now +1.7% versus Canada’s +1.4%.
In services, the U.S. is +2.3% while Canada is +1.9%.
Neither country is exceling in manufacturing employment, but at least the U.S. is holding steady (+0.2%) while Canada is falling (-4.9%).
The drop in value of the Canadian dollar to a present reading of about 95 cents U.S. will boost export sales and provide a reason for some manufacturers to take on more production-line workers.
There is one industry where Canada is outshining the U.S. at this time, however, and that’s in construction, +6.2% versus +3.4%.