Wild Gyrations Mask a U.S. Job Market That’s Solid, Yet Cooling

  • Employment has taken a step down when compared with 2015
  • Jobless rate rose as people entering workforce came up empty

Why So Much Volatility in U.S. Jobs Reports?

The job market in the U.S. doesn’t turn on a dime for no apparent reason, only the data do.

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The surge in payrolls in June exceeded all estimates of 89 economists surveyed by Bloomberg, and the increase the prior month was even smaller than previously estimated and the weakest in almost six years, data from the Labor Department showed Friday. That sort of swing just doesn’t happen in an $18 trillion economy absent some sort of major shock or statistical quirk.

Looking through the dramatic gyrations, the picture that comes into focus is that the labor market continues to strengthen, although it’s lost a step from last year. While reassured by the progress, Federal Reserve policy makers probably won’t be in any rush to raise interest rates as they weigh a recent pickup in consumer spending against the impact on the American economy from the disarray in Europe and slowing growth in China and other emerging markets.

“Job growth has clearly slowed, that isn’t surprising,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, and the best forecaster of U.S. payrolls over the past two years, according to data compiled by Bloomberg. “But that doesn’t mean the economy is in serious jeopardy of falling into a recession.”

The reason for the slowdown is probably that the expansion is now seven years old and economy is reaching full employment. In other words, most of the people looking for work have found it, and there aren’t many left with the skills employers seek. The jobless rate last month climbed to 4.9 percent from 4.7 percent in May as those entering the labor force in search of a job came up empty.

Employers added 287,000 workers to their payrolls in June after just 11,000 in May. Over the past three months, job growth averaged 147,000.

‘Solid’ Gain

“We’re going from very strong job growth to solid-enough job growth,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “The U.S. economy is still on pretty solid ground, especially relative to Europe.”

There were enough caveats to keep Fed officials on hold for now. The payroll survey period which includes the 12th of the month took place before the U.K. voted in favor of leaving the European Union, which briefly sent global stock markets into a tailspin.

Pay also was lackluster. Wages rose just 0.1 percent in June from the prior month, less than projected and showing earnings are lagging behind.

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