June Jobs Report shows US still strong

Resiliency is back on the front burner to describe the US Jobs outlook after Friday’s release by the Labor Dept., that showed 206,000 non farm jobs, and a slight uptick in the unemployment banner of 4.1 percent, all of which has showed a slight cooling off in American employment, and which has given hope to some that the Federal Reserve will lower interest rates, but as we have said before, in many previous posts, that the chair, Jerome Powell, is data driven, and the data is not quite there yet as we see with this report.

There has been a shift in the areas that show gains, leisure and hospitality have dipped, as has retail and construction, with the strongest gains showing in education, health care, and state and government employment.

The good news is that this is the 42nd straight month of job gains, and this steady pace, despite the naysayers who predicted a recession; and, most importantly wages have increased to 0.3 percent from May, and lower wage earners have seen their incomes rise, an important move, since they hey spend a greater portion of their income on housing, and other essentials.

For others wages have increased to exceed inflation, helping those people keep pace, and even a little extra, for vacations, and that favorite American pastime: dining out.

This is especially true for those in government employment which peaked at 70,000, health care at 49,000, and a bit of a sleeper category, social assistance which hit 34,000.

Of note construction added 27,000 jobs, and retail changed little 9,000, despite an earlier trend up earlier in the year the report noted, but not quite the major loss that some have stated.

Mary Daly, the president of the Federal Reserve Bank of San Francisco, said in a speech before the report was released on Friday, “At this point, we have a good labor market, but not a frothy one,” but added, :future labor market slowing could translate into higher unemployment, as firms need to adjust not just vacancies but actual jobs.”

Revisions of the jobs report are the norm, and both April and May have been revised downward, April now at 108,000, and May to 218,000, which might appear to be examined by Powell and the Federal Open Market Committee, at their next meeting.

In the absence of the London bookies, Americans, especially the stock market, are hedging their bets and are looking at September as their month for interest rates cuts, but, many people, both professionals and consumers, forget that interest rates are cut to stimulate a weakening economy, not to strengthen it, a fact that even many in the media seem to forget.

Neil Dutter at Renaissance Macro Research, was reported, in a note, by The New York TImes, stating, “today’s employment report ought to firm up expectations of a September rate cut.” and added that the cool off, slight as it might be for September, if not at this month’s meeting, that “they ought to make a strong signal a cut is coming.”

Powell himself, true to his pattern, has said, more cooling data would make the grade for a cut, saying, “like what we’ve been seeing recently,” before any rate cutting, and “We’d also like to see the labor market remain strong, We’ve said that if we saw the labor market unexpectedly weakening, that is also something that could call for a reaction.”

One area of note is the dramatic loss of temporary help services, down by 49,00 for the month, taking down that category of business services, and as CNN reported “is often closely watched by economists as it could serve as a forward looking data point in an an otherwise lagging indicator,: since as business grow they hire more temps and if times are tougher, the temp workers are the first to go.”