The June United States nonfarm job level declined by 125,000. The decrease reflected a 225,000 decrease in the number of temporary employees working on the 2010 Census. The government sector decrease was offset by a private–sector payroll employment increase of 83,000. The unemployment rate edged down from 9.7 to 9.5 percent.
The unemployment rate drop is attributable to a labor force decline that outweighed the job decline. The June labor force decline continues a decline from last month that is an offset to labor force gains in the previous four months. In the past six months the labor force rose 1.7 million persons from the December 2009 low, then fell by about 1 million people in the last two months. These imply that the current labor force level is still about 700,000 people above the cyclical low. If it is true that the recent labor force increase was an unsustainable blip, then we might expect another labor force decline next month.
If next month’s expected labor force decline were similar in magnitude to the employment decline, the unemployment rate would remain essentially unchanged. One reason to expect an employment decline next month would be due to an ongoing contraction of temporary Census workers. The remaining temporary Census worker count is roughly 250,000 jobs. We expect the July labor force decline to outweigh the employment decline, but to less extent than this month, resulting in another unemployment rate decline.
The private-sector employment change was mostly driven by declines in Construction, Information, and Finance more than offset by gains in Manufacturing, Professional services, Education/Healthcare services, and Leisure/Hospitality services. The gains and losses in Manufacturing and Information, respectively, are small and offset each other.
The June gain in Professional services of 46,000 workers is welcome in this barely-a-recovery recovery. These are helpful because they are typically well-paying positions that will benefit the recovery better than low-paying positions. The Leisure/Hospitality gain is the first significant gain in this sector thus far in this cycle. This gain is dominated by amusements, gambling, and recreation, so aside from Casino cities, the gain may not be consistent with stabilization of rent and lease trends in most restaurants and hotels.
Our back-of-the-envelope July job change projection would be driven by a presumed Census worker contraction of 230,000 that would be offset by private-sector gains of 80,000 resulting in an overall 150,000 non-farm job drop. If the employment survey drop matched the job drop and the labor force contracted by 300,000 then the unemployment rate would be a bit over 9.4 percent in July.